I am trying to analyze a duplex deal in LA, asking price is $860k, rent expected about $5,500, this was bought back in 2015-16 for $460k, doesn't look like a right time to buy with prices soaring all over in Southern CA, however, the duplex does end up with positive cash flow of at least $1,000
Rent income $5,500
Mortgage+property tax+insurance: $4250
Cash flow: $1,000
Would you buy in this market or wait for the dip to come? I am conflicted with ideas such as this may not be best time to buy, or I can never time the market anyways so if cash flow is positive, why not go for it?
@Kareena Sharma you make money when you buy....with that being said, if the numbers make sense buy, but in today's environment will you be able to cover the mortgage if the tenants don't pay?
Would you be willing to invest out of state where you could buy a larger property for the same $860k but get a better return?
I'm not selling anything just giving you something to consider. LA is an expensive market.
I ran the numbers.... $860k w/ 20% down on a 20 year AM is $4260 before taxes and insurance. If you go out on a 30 year AM the payment drops to $3385 before taxes and insurance.
They've been talking about a market dip for years but it hasn't come yet...I wouldn't bet on timing the market. Remember you make money when you buy....what other opportunities are out there?
Can't time the market... if it cashflows in SoCal go for it. Are you planning to self manage @Kareena Sharma ? I also didn't see any vacancy factored into this.
You need to account for Capex, repairs and maintenance and vacancy if you really want to underwrite this deal. Then check your cash-on-cash return as well afterwards. You're a few calculations short of actually vetting this deal, but you're in the right track. Let me know if you have any specific questions and I can try and advise.
Could still be a deal and you could be buying under market value as well, but just wanted to give you my feedback.