Duplex Purchase - should I pull the plug on the deal?
We've been looking for another duplex for a year, and haven't found one that works for us. We finally found one, are in contract, and received some new info today that has me ready to pull the plug. Would like some advice.
Location: Delaware, OH (north of Columbus - lots of commuters to the big city for work). As far as apartments go, nearly everything is a complex - limited availability of duplexes around the city. Between 2000-2012, the population grew by 43%.
Purchase price: 129,000
Rent: 675 + 650 (1325/month)
Down payment: 32,250
Bank financing: 96,750 @4.375
Payment: 483.06
Taxes: 216/month
Insurance: 66/month
Property management: 0 (we self-manage)
Vacancy/Repairs (15%): 198/month
Utilities: $170/month! This is our new information. The MLS ad said tenants pay utilities, it turns out that the landlord pays water, and we just obtained this figure a few minutes ago. This is a huge hit to my numbers.
Cashflow: $164 (this is the number I always focus on)
50% rule: $75/door/month
2% rule: 1%
I would get the water metered out separately for ~$500. I'd probably drop their rents by $25/each, and make them pay the water (I'd still be ahead $120/month). I'd also do it on a month-to-month, and re-add the $25 next summer.
Losing the water bill and dropping the rent a bit puts me at:
Cashflow: $292
50% rule: $65/month
2% rule: .94%
The property is in fantastic shape - we'd need no immediate work on it. Tenants mow the grass. I'd call it a B or B- neighborhood. The rents are right in the middle of market rate. This would be an easy place to keep rented, and maintain (I included repair costs/capex at 10%, but my husband also does all the maintenance/repairs, short of new roofs/furnaces)
I can probably talk the seller down a few thousand based on this new info - maybe $125k.
Advice appreciated!
Thanks!
Pam