First time investor -- is this a good deal??

[Justin Miles]

Hello BP community! I'm new to RE investing and excited to be here! My wife and I are currently under contract on our first rental investment! Also, we are new parents to a 7 month old, so crazy year!

The deal:

Turnkey Duplex in Fairborn, OH that is currently vacant. Each unit is ~780 sq ft, 2 bed/1 bath.  House built in 1944. Both units recently renovated (cosmetically): new floors, paint, trim, etc. New windows in each unit, new furnace in one unit (other unit has old furnace), roof is in good shape (5+ years left), and newer appliances. Nothing known wrong/needs fixed.

Purchase price: $176k (also, the appraised value). Putting 25% cash down

Rent: Similar rents in the area are $750-1050. I am anticipating $900 per unit in area ($1800). Both units are currently vacant.

Rental analysis assuming 10% vacancy, 5% maintenance, and 10% cap-ex (anticipating needing 1 new furnace in 1-2 years). Input assumptions show $300 monthly cash flow / 6.7% CoC ROI, $14K NOI, and a 8.6% 5 year annualized return if sold.

We are under contract, so it is likely too late (first mistake).

To clear my conscious or learn from my mistake, is this a good deal??

Thank you!

[Dan H.]

Quote from @Justin Miles:

Hello BP community! I'm new to RE investing and excited to be here! My wife and I are currently under contract on our first rental investment! Also, we are new parents to a 7 month old, so crazy year!

The deal:

Turnkey Duplex in Fairborn, OH that is currently vacant. Each unit is ~780 sq ft, 2 bed/1 bath.  House built in 1944. Both units recently renovated (cosmetically): new floors, paint, trim, etc. New windows in each unit, new furnace in one unit (other unit has old furnace), roof is in good shape (5+ years left), and newer appliances. Nothing known wrong/needs fixed.

Purchase price: $176k (also, the appraised value). Putting 25% cash down

Rent: Similar rents in the area are $750-1050. I am anticipating $900 per unit in area ($1800). Both units are currently vacant.

Rental analysis assuming 10% vacancy, 5% maintenance, and 10% cap-ex (anticipating needing 1 new furnace in 1-2 years). Input assumptions show $300 monthly cash flow / 6.7% CoC ROI, $14K NOI, and a 8.6% 5 year annualized return if sold.

We are under contract, so it is likely too late (first mistake).

To clear my conscious or learn from my mistake, is this a good deal??

Thank you!

 For those that believe the numbers are conservative I question how they have derived maintenance/cap ex. Your numbers are way too low even if everything was new today.

conservative underwriting should use the conservativ3 number on all ranges.  This implies $1500 total rent.

That rent range will be cash flow negative at 1% monthly rent ratio.

That purchase price reflects that this property has historical appreciation below the inflation rate.   It likely will decline in value in inflation adjusted dollars.

Hopefully you did not waive your inspection contingency.   Seeing you are paying fill retail (ie appraised price), you should not have waived an6 of the standard contingencies.  Get a good inspector. 

Note S&P has lifetime return near 10%/year.   To invest in a non passive investment that has the risk of RE, it should return a much higher return.   Anything less than 20%/year projected return and I question why.

Good luck