My Duplex Deal... Please Analyze

14 Replies

My partner and I are going to put an offer in on this duplex tomorrow, and just wanted to have some others look at it to make sure we analyzed it correctly.

The owner purchased the duplex 1/12 years ago as a foreclosure. One unit is 2br/1ba and the other is 1br/1ba. He inherited both tenants and they have been their the entire time he has owned it. Him and his wife just purchased land to build a house, so they need to sell so they can begin building. While he has owned the place he as put a new roof on (tear off, so it only has 1 layer), put new doors on and some other misc stuff. The water heater is new, and the furnace is older but my father (a contracor and also a landlord) inspected it and said it should last at least a few years.

He is asking $31,900. The rents for the two apartments are $450 and $550, so $1000 gross rents. The utilities are not split (so they are currently included in the rent), but once a tenant moves out we plan to split them and make the tenants pay them.

We plan to offer $25,000 and assume we can negotiate to $28,000.

Using Mike's 50% operating expenses, that leaves $500 for NOI. Subtract a mortgage payment of $266 (10 years @ 8%), that leaves $233 left, or $116 per unit.That is based on a 20% down payment and 5% closing costs, leaving an approximate ROI of 40% (based on $6986 out of pocket costs).

I have attached analysis sheet that I created for this. Please let me know if my numbers are accurate and if this look like a good deal.

Any ocmments are appreciated. Thanks!

Except for the owner-paid utilities, I like it! However, with rents of over 3% of the purchase price (4% at $25K) and very long term tenants, I still like it. Just be sure to check the utilily bills from the last couple of years and any leases that are in-place.

Congratulations on finding a good deal!

Good Luck,

Mike

Well, I just put the offer in for $25,000. When I did, I told the guy that I had talked to my partner. I gave my partner some information about the property, and some of the things we had discussed (the utilities were not split, upstairs would need some updating when a tenant moved out, etc), so my partner ran the numbers and we can offer $25,000 for the property. The guy seemed receptive and said he would have to talk it over with his wife, and as long as she was ok with it we could move forward. He said he would call me back tomorrow night.

Thanks for the responses, and I will keep this thread updated.

Well, bad news. They owner is selling to someone else.

He called me today @ 3:30 (I was in a meeting at work) and left me a voicemail saying to call him back by 4. I got out of my meeting and called him, and he said he had just sold it to someone else for $26,500, without even coming back and asking if we would offer more. Seems like the guy wasn't too bright. He had two people who wanted to buy his property, and did not even try to work them against each other to get the price higher.

I told him to give me a call if the deal fell through for some reason.

Good news, we got the house. The owner called me today and said the other buyer had a family emergency and had to back out. (I am still wondering if there actually was another buyer). Anyways, the guy said he wanted to get $27,000 for it. The "other guy" was going to buy it for $26,500. We agreed upon a price of $26,000. I am meeting him tomorrow to get the contract signed.

I'll keep this thread updated as things progress.

Originally posted by "CAranchsales":
Unbelievable! No prices like that in my neck of the woods. Nice find, how did you find it?

I take it you have not been to upstate or western NY before.

John Corey

Originally posted by "REI":
Originally posted by "CAranchsales":
Unbelievable! No prices like that in my neck of the woods. Nice find, how did you find it?

I take it you have not been to upstate or western NY before.

John Corey

Basically... We do not have much appreciation, but you can find cheap houses to cashflow all day. Now if only I could find the financing...

Well, good news. I talked to the mortgage broker that we used when purchasing our own home. We can get a mortgage through them which only requires us to put 10% down. I will be meeting with the ladyy on Monday to discuss the details.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here