Waterfront Duplex - Private Sale - Divorce Sale (Possible1stBuy)
Hey Guys,
This is my first post so I welcome criticism and suggestions for improvement in presenting this data :) The listing details are below along with my cash flow analysis. I came across a listing from a friend back in my hometown in New Brunswick, Canada. She told me the seller is undergoing a divorce and wants to sell the property ASAP. This is also a private sale. This is a duplex that a couple owned but they have recently divorced, the house has been on sale now for 5 months. The couple were living in the 4 bedroom unit and renting a 3 bedroom unit for 900/month without electricity/heat included. I believe in this area i can achieve 1600/month for the 4 bedroom apartment and 1400/month for the 3 bedroom apartment by going to all included (internet/heat/elec). Also the 1600/month and 1400/month are conservative (still need to do further research on this). Based on my cost analysis I can achieve a $600.00 monthly positive cash flow before taxes for the 2 units and also have a ROI of 28.81% if I get the property at list price and pay 20% down. I am currently living in a different city 3.5 hours away but the market here is tough right now, so I would continue to rent in this city and possibly still purchase this property based on the ROI and CAP rate (let me know your thoughts on this). I am thinking as this is a private sale and a divorce sale i will have some room to negotiate price, possibly go with a 180K offer and work from there (if my cost analysis is correct the unit will still cash flow at list price so any gain here is bonus). I have a lot of cash reserves right now so I will still have enough for a second property for the city I am currently living in now. Let me know your thoughts, i am a rookie and this would be my first investment property.
For exit strategies I think if I can get the house wholesale then i should be ok finding a seller while i would continue to rent out the property. For finding tenants there is a local college near by and also i hear that there is a demand for high quality rentals in the area so i think i would be ok here. I am not sure how easily the existing tenants in the 3 bedroom unit would be to replace to do some light renovations and up the rents but I will play that one by ear and research possibly strategies. I really like the BRRRR strategy but where there is a new property and in good condition on the inside I am not sure how much the property value would increase after what minor renovations the property would require, i still need to research this for the area.
Any thoughts or help appreciated! I am working with a few local gurus in my current city but as i just found this deal tonight i have not had the chance to talk to them about it.
My Cost Analysis:
| Monthly Operating Income | Scenario A |
| Number of Units | 2 |
| Average Monthly Rent per Unit | 1,400.00 |
| Total Rental Income | 2,800.00 |
| % Vacancy and Credit Losses | 10.00% |
| Total Vacancy Loss | 10.00 |
| Other Monthly Income (laundry, vending, parking, etc.) | - |
| Gross Monthly Operating Income | 2,790.00 |
| Monthly Operating Expenses | |
| Property Management Fees (NA For This Would Do Myself With Local Family) | |
| Repairs and Maintenance | 250.00 (Estimating to confirm) |
| Real Estate Taxes | 258.33 (Confirmed from seller) |
| Rental Property Insurance | 140.00 (Estimating to confirm) |
| Homeowners/Property Association Fees (NA for this property) | |
| Replacement Reserve | 50.00 (Is this ok for a new 2003 property?) |
| Utilities | |
| - Water and Sewer | 58.33 (Confirmed from seller) |
| - Gas and Electricity | 208.33 (Estimating to confirm) |
| - Garbage (NA for this property) | |
| - Cable, Phone, Internet | 120.00 |
| Pest Control (NA for this property) | |
| Accounting and Legal (NA for this property) | |
| Monthly Operating Expenses | 1,085.00 |
| Net Operating Income (NOI) | |
| Total Annual Operating Income | 33,480.00 |
| Total Annual Operating Expense | 13,020.00 |
| Annual Net Operating Income | 20,460.00 |
| Capitalization Rate and Valuation | |
| Desired Capitalization Rate | 10.00% |
| Property Valuation (Offer Price) | 204,600.00 |
| Actual Purchase Price | 210,000.00 |
| Actual Capitalization Rate | 9.74% |
| Loan Information | |
| Down Payment | 21,000.00 |
| Loan Amount | 189,000.00 |
| Acquisition Costs and Loan Fees | 4,000.00 |
| Length of Mortgage (years) | 25 |
| Annual Interest Rate | 5.000% |
| Initial Investment | 25,000.00 |
| Monthly Mortgage Payment (PI) | 1,104.88 |
| Annual Interest | 9,361.50 |
| Annual Principal | 3,897.00 |
| Total Annual Debt Service | 13,258.50 |
| Cash Flow and ROI | |
| Total Monthly Cash Flow (before taxes) | 600.12 |
| Total Annual Cash Flow (before taxes) | 7,201.50 |
| Cash on Cash Return (ROI) | 28.81% |
The Official Details From Seller:
Asking: $210,000.00
Property Details
Storeys: 2 Building Size:
Lot Size: 1045 Square Meters
Building Size: 2328 Square Feet
Estimated Annual Taxes: 3093.00 (2017)
Unit 2 Presently rented: Rental Income $900.00 /month (not including Power)
Features
Water Front Property (In this small town)
Flooring Unit 1 Laminate and Unit 2 Laminate, Vinyl and Carpet
Foundation - Concrete with 4 foot walls for unit 2 apartment (allows for much natural light with large windows in all rooms)
Heating - Baseboard, Electric,
Other Inclusions - Dishwasher, Fridge, Stove, Blinds, Washer, Dryer in both units~ Taxes, Water/Sewer paid until the point of Sale
Outdoor: Landscaped and water fountain
Roof Asphalt Shingle
Services Electricity, FibreOP High Speed Internet, Telephone and cable/satellite
Water and Sewer ~ Municipality System approximately $650.00 per year
Rooms
Main Floor ~ Unit 1 1260 Square Feet
KITCHEN / DINING ROOM 12’ x 15’
LIVING ROOM 15’ x 15’
LAUNDRY ROOM 6’ x 3’
BATHROOM 6’-6” x 11’-6”
MASTER BEDROOM 10’-6” x 11’-6
BEDROOM # 2 (walk in closet) 9’-4” x 11’-6
BEDROOM #3 9’ x 11’-6”
BEDROOM / Office #4 9’ x 11’-6”
DECK 12’ x 15’
Rooms
2nd Floor ~ Unit 2 Walk Out 1068 Square Feet
KITCHEN / DINING ROOM 10’ x 15’
LIVING ROOM 15’ x 15’
LAUNDRY ROOM 6’ x 3’
BATHROOM 6’-6 x 11’-6”
MASTER BEDROOM 10’-6 x 9’-6”
BEDROOM #2 9’-6” x 13”
BEDROOM #3 10’ x 11’-6”
UTILITY and STORAGE ROOM 9’ x 12’
BABY BARN 8’ x 10’