Good morning BP nation! I'm looking at a duplex as a buy and hold property where I would not live in either units but would be the PM.
Purchase price $150,000
20% down 30 year mortgage
Initial cash invested $34,500 ( closing costs 3%)
Unit 1- 1 bed 1 bath rents currently for $775 but will be going up to $800
Unit 2- 3 bed 1 bath and will be renting for $1,000
Gross rent- $21,600
Operating income- $19,872
Operating expenses- $8,343
Cash Flow- $4,654
Cash on Cash return- 13.5%
This would be my first duplex and looking for any insights on if this is a solid deal or what numbers I would need to make this work.
Looks good so far!
This deal looks like a good deal, except for the 1 bd apt. I think most investors find that 1 bedrooms tend to have a high turn over. I'm not familiar with your local market, but your numbers are very similar to a deal I just picked up with the minor variation that I paid $109k for it and it is 3400 sqft with a 2 bd and a 3 bd. I'm getting an ROI of 20% with $34k into it.
Good luck on this one!
I think there might be a problem with your numbers. I'm only getting a 2.7% cash on cash.
8% vacancy, 10% capex, 10% repairs, taxes(6200), insurance(1100), plus debt services. I'm only getting a cashflow of $75 a month.
It's a rent multiplier of 8 which is fine, but the taxes are killer.
If I use your numbers but add property management cost to be able to evaluate as a pure investment I get a cap rate of 5.9%. You also have a small part-time job of property manager. You did not break out expenses so I am assuming all expenses are included such as maintenance/capital reserve.
I prefer to have my NOI/Cost to be 3 percentage points above my cost of money so I would like my cap rate to be 7% to 7.5%. I assume though that your expected appreciation in your area to be higher than normal so would be a good deal.
Looks like a decent deal (not a great deal) based on what I see here but I have a few concerns... I agree with Gualter, 1 bedrooms generally have high turnover. That's something that I would keep in mind but it would never be a total deal breaker for me. I would have a problem with a 13.5% COC. That's just kinda low for my taste. It would be different if that was the Cap rate. Also, I'm just trying to see how you did your math. I see that you separated the gross rent from the operating expenses. Usually if this number is different it's because the operating expenses reflect other income such as coin-op laundry, vending machines etc. But the operating expenses aren't usually lower than the gross rents. Also I see that you separated the taxes from the operating expenses. Taxes are generally calculated into the operating expenses. Not a big deal as long as you calculated them both into your offer. Just making a note of it.
Join the Largest Real Estate Investing Community
Basic membership is free, forever.