Putting an offer in tomorrow on my first rental!!

4 Replies

So, I think Im going to put an offer in tomorrow!! I found a duplex built in 2003, List price is $110k but has been on the market for a couple of months now. I crunched the numbers and if I buy at 105k and put 17k in repairs and rent it at a total of $1300/month
cashflow=$5634
cash ROI=13.87%
total ROI=16.78%
CAP=10.17%
COC=13.868%
Seems too good to be true, so Ill keep yall posted!

Something doesn't seem right. If this was a good opportunity, why has it been on the market this long? What are the comps in the area?

Its actually priced a little high. There are a couple more sfh's I have my eye on for around $80k. This neighborhood is a little run down, but its by no means a ghetto, just old. Im not too sure how much the property will ever appreciate, but it needs rentals. I personally know a co-worker renting a newer 3/2 down the road for $1900/month.

I'd pump the brakes a little at that price and amount of repairs needed.

There are several duplex's on my MLS with identical numbers that sellers can't seem to unload.

By time you factor in Vacancies, Tenant Turnover expenses, Maintenance, and Capital improvements your returns are going to take a pretty good hit.

Demand seems to be the big issue with Duplex's in my area. I had a nice duplex under contract last year that was 2b/2ba on each side. Had it under contract for $59,000 IIRC. Market rent was around $650 per side.

My other properties are 2br 1ba single family homes that rent for $750 and they rent within a week. I decided to run a ad as usual for the duplex units on craigslist before purchase to gauge the demand and quality of tenants and it was enlightening to put it mildly.

Every person that inquired about the duplex units either lacked the ability to speak proper English or hung up shortly after they realized it was a duplex instead of a single family home.

I had it listed for 3 weeks while the bank sorted out title issues and basically my option was to rent it sec 8 or no tenant.

I backed out due to the title delays, but honestly looking back I probably should have bought it and dropped the rate to $550 per month. Numbers would have still been good at the contract purchase price.

Could be a totally different experience in your market, but that's my first hand account of dealing with a duplex vs Single Family.

You did not ask a question but I assume you want us to tell you whether we think this is a good deal or not. If you add the expenses that Ed mentioned + management costs I expect the cap rate is in the 6-7% range. I would expect that you can find better deals than that.

Good Luck.

Bill

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