First time investor about to close on duplex deal in DFW area

19 Replies | Fort Worth, Texas

Hello,

I am about to close on a deal on a 2005 8br/4ba (4/2 on each side) duplex that I was hoping to get analyzed as this is my very first investor purchase.

Purchase Info
Square Feet (2 Units) 2,492
List Price $189,900
Purchase Price $171,750
Initial Cash Invested (down+cc) $51,340 
Income Analysis Monthly Annual
Net Operating Income $1,171/mo   $14,047/yr
Cash Flow $527/mo  $6,330/yr
Financial Metrics
Cap Rate (Purchase Price) 8.2%
Cash on Cash Return (Year 1) 12.3%

Does this seem like a decent deal? Option period just expired with the inspection popping one major problem with the HVAC that seller is fixing. Just nervous since this is my first deal and am second guessing the numbers. I am not even sure what questions to ask on here. Thoughts?

Thanks!

CK

@Andrew Herrig apologies in the delayed response as I did not get notification of your post for some reason. Location is Azle, TX. Gross rents annually: $19,860. 

@Thurman Schweitzer I am on track to close on Nov 13 and everything is looking good for closing. Seller and I negotiated repairs and we are on track. Now on to reading, researching, watching podcasts on being a landlord!

Any updates? My first SFR will be listed this next week, doing house cleaning this week. Property manager told me it will rent fast.

In market for 2nd but still think duplex is the right next move

@Thurman Schweitzer It has been a great learning experience for my 1st time. The price was initially negotiated to $170k, then a further reduction to $165k based on the appraisal. 

Here are the final stats (not sure if this will copy and paste correctly):

Purchase Info
Square Feet (2 Units) 2,492
Purchase Price $165,000
Initial Cash Invested $49,727
Income Analysis Monthly Annual
Net Operating Income $1,032/mo $12,387/annually
Cash Flow $414/mo  $4,973/annually
Financial Metrics
Cap Rate (Purchase Price) 7.5%
Cash on Cash Return (Year 1) 10.0%
Internal Rate of Return (Year 20) 16.9%


On the land lording side, I was forced into a crash course when I had to kick out one of the tenants due to non-payment of rent. I filed for eviction, but tenant requested a written agreement for a payment plan to pay back rents owed and a final move out date. I assumed that tenant would not stick to agreement for payments, but they did move out on the agreed date, with only minor damage to the unit (less than $1k damage. They knocked out a 12"x12" hole in the sheetrock, but could have been much worse). I now have dependable renters in that unit who pay every month on time. 

Also, both tenants pay online now, rather than driving 30 miles into the previous management company location. They are both happier about that :).

Will be looking at my second duplex this week and hopefully making an offer. 

Originally posted by @Carol Kohn :

@Shanel Wiggins I found it on MLS. It was an aging listing because it was overpriced at $189k. I offered $150k to see if the seller responded. He did and we ended up at $165k.

 Nice.. Did you find your next deal already?

Hello Carol,

I am interested in your Cap Rate % and Cash Flow amount.  I have been looking at similar type properties in Tarrant county region and putting your numbers into my model I am coming far short of your returns.  I am concerned that I have miscalculation in my model.  

My model includes a prop mgr fee as I am a remote landlord but even assuming you are doing your own prop managing (which it sounds like is correct) I still far short.  My model does include an annual maintenance amount and a big ticket amount (capex  ie roof) and finally some utilities (I like to pay the water bill and lawn maintenance so the exterior always looks decent).   Does your model not include amounts for the above items?

Sorry if being nosy but I am concerned if I am being too conservative.

Thanks,   Joseph

@Joseph Knapp I currently self manage so I have no property mgmt fees. Also, tenants pay all utilities and are responsible for lawn maintenance. I am considering moving to a model that will offer lawn maintenance for a higher rent price, but it's just a thought. Here is a more in depth look at income/expenses:

Income Monthly Annual
Gross Rent $1,655/mo   $19,860/annual
Vacancy Loss -$83/mo   -$993/annual
Operating Income $1,572/mo   $18,867/annual
Expenses (% of Income) Monthly/Annual
Cleaning & Maintenance (10%) -$157/mo   -$1,887/annual
Insurance (6%) -$93/mo   -$1,120/annual
Capex (5%) -$79/mo   -$943/annual
Taxes (13%) -$211/mo   -$2,530/annual
Operating Expenses (34%) -$540/mo   -$6,480/annual