Investor · Columbus Ohio · Member since 2022 · 27 posts · 34 votes
Hi, so far the properties we have bought in the past only needed under 15k in repairs. This will be our first property that would need major repairs.
Up (2 bed/ 1 bath) and down (1 bed/1 bath) duplex located in a B-/C+ neighborhood in Cincinnati
Purchase price: 147,500
Estimated cost of rehab: 38,050
ARV 215,000
Rent-income: 2,045/month
COC ROI: 7.75%
My hesitations:
1. It's a 2 car driveway but it will be very tight for two cars. So solution will be rent the garage to upstairs tenant and street parkin for downstairs tenant. It's along a relatively busy street that does not allow street parking, so tenant would need to park in a nearby side street.
2. It was built in 1910. So there may be more repairs needed in the coming years that are not covered by the initial 38,050 repair budget.
Does this sound like a good deal, or should we terminate the contract? Thank you all!
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
2y
No...a 1910 house will require more repairs than ever revealed from an inspection or walk-through. I own one of these 'historical treasures' so I know first hand the required and continuous maintenance that will come your way. Also your insurance expense will be higher due to the structure's age. I also caution in taking on more than double the rehab expense you've incurred in the past - especially with a property that isn't tenant friendly from a parking standpoint; it won't be long before the trekking tenant discovers that trolling for street parking isn't the cruise he signed up for and starts parking in the yard, squeezing in the driveway, or starts claiming defects with the property so he can terminate the lease.
I recommend walking from the property due to its age, rehab expense (which will likely go higher than estimated), and the parking challenges. Just my two cents...hope this helps.
Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes
2y
Hi @Mary Pastoral, congratulations on getting your deal under contract!
However...
Have you already completed your inspection? If so, you should already have as pretty good idea of which capital expenses you will face in the future. You don't want to have to guess. If any of the "Big Five" systems (HVAC, plumbing, roof, electrical, water heater) haven't been updated recently, they still should be budgeted, even if you expense them later.
Also, if you're primarily buying for cash flow, then this seems like a whole lot of work for just 7.75% CoCR! We typically aim for 10% at minimum.
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
2y
No...a 1910 house will require more repairs than ever revealed from an inspection or walk-through. I own one of these 'historical treasures' so I know first hand the required and continuous maintenance that will come your way. Also your insurance expense will be higher due to the structure's age. I also caution in taking on more than double the rehab expense you've incurred in the past - especially with a property that isn't tenant friendly from a parking standpoint; it won't be long before the trekking tenant discovers that trolling for street parking isn't the cruise he signed up for and starts parking in the yard, squeezing in the driveway, or starts claiming defects with the property so he can terminate the lease.
I recommend walking from the property due to its age, rehab expense (which will likely go higher than estimated), and the parking challenges. Just my two cents...hope this helps.
Investor · Columbus Ohio · Member since 2022 · 27 posts · 34 votes
2y
@Mitch Messer, thank you for your advice. Yes, inspection has been done. The 38K includes, plumbing, electrical, water heater, and cosmetics. To replace the roof would be an additional 7,500. The detached garage has a foundation problem that costs 9,100. That really does not add value to the house unfortunately. The original purchase price was 182,500 and the final settled price is 147,500. I do not think sellers would allow any more price reduction unfortunately.
@Patricia Steiner, thank you for your insight. I really appreciate it. My cause of conflict is that I feel like I am getting a great deal because of the price reduction I got. It has just been so hard to find a good deal lately.
Contractor · Richardson, TX · Member since 2022 · 265 posts · 146 votes
2y
Mary, fly me out there, and I'll be happy to stay in the property, while doing the ON-GOING repair work it will need! lol As was said, Century old houses are a "chore" to keep up with. I had a 1901 2sty Victorian style house... while I loved it yes, it was a never ending Project house. Still had the old Deerborn heaters and window units it in! But also... sagging roof and some structure, hollow walls= no insulation or anything! You could look down the empty cavities from the attic! Thin glass, rotting wood windows, etc etc etc! I actually did keep it up fairly well until, I said enough! That was 20+yrs ago... still miss it but, don't miss the headaches (which I didn't mind at the time of course) lol
It's going to be different with it being as a Rental or Investment for you (instead of your own home). Keep in mind that you'll have unique issues with it that WILL have to be addressed at some point if they haven't already... (outdated wiring, plumbing, ...)