I'm looking for some feedback on the below numbers. This would be my first rental property, and I plan on a buy and hold strategy.
Couple of things to note:
125,000 is full asking price. I think the property is worth between 110-115 based on SFR sold comps. I don't know how to value based on the fact it is a two family.
Unit is currently leased, however, average rent in the area is around $730/unit.
Unsure of any repair costs because I haven't been through property yet.
Feel free to ask any additional questions.
I have a feeling that this deal is a no go at these numbers. At what purchase price does this deal start to make sense?
Any and all feedback would be greatly appreciated. Thanks.
Any help on how to post a spreadsheet to size in here?
Until then, here are the numbers;
$125,000 asking price. 30 yr loan at 4.5% with 20% down. Pmt would be $507/mnth
Taxes are $1721 annual, insurance $1110 annual.
Maintenance $1000/yr, $725 admin costs, $100 advertising, $1685 variable costs (12% of income), 10% vacancy rate
2 units renting for $650 each.
Mark, what's the address? Size of the units? Without knowing that, it's impossible to give you feedback. The numbers are very light unless this is in a primo area of St. Louis.
For comparison purposes, I bought a couple of duplexes on Bermuda Drive for $50k each about 6 months ago, $100k total for four units that are rented at around $685 each.
Address is 5526 Milentz 63109. 2bed/1 bath units around 1000 sq ft.
Located in South St Louis, which is a decent area, but certainly not "primo".
As I mentioned in my first post, I think the current rent is low at $650. Area should be around $730, but I was shooting for $700/mnth.
The appealing thing to me is that there are already tenants and both have been there for over 2 years.
At what purchase price does this make more sense?
Looks nice! Could make a good turn-key investment but it's certainly retail-priced.
I'm paying about 60 times rent for SFRs in Florissant but those are not rented so it's a little more involved.
If you were to apply that ratio to this deal, you'd pay no more than 84k. I'm not familiar with the location or the comps though so if these duplexes go for that much in that area, you would have to pay up.
It's tough to give advice on this one. That is definitely a 'pride of ownership' area and many there will buy 2 families to live in one and rent the other out to live for free. Also, because of the area, some people take the approach that it's easy to manage with easy to find good tenants so in 30 years they will have a paid for property even if they don't make money right now. So there are different market forces at play here than a 2 family east of Grand or North County.
Using the 50% rule with rents of $650 each and a $507 payment, you cash flow almost $150. Not $100 per door like some aim for, but respectable for the area. It seems to me that $125k+/- would be a decent price if it's in top shape (I'm talking area sales, not cash flow metrics you find here on BP). One of the units looks to still have the old metal cabinets so I don't think it should be priced at the top of the market so your range of $110-$115k is probably a decent price for the area. Thus it's listed with an agent on MLS.
If you want a good, solid building in a good solid area; this may be a pretty good deal for your first one. You won't lose money with it. If you're looking for top dollar cash flow, you can find much better returns elsewhere but that will also be more work and a steeper learning curve for a first rental. To put this in other terms, this area is an AA bond (AAA is the top), it won't have the greatest returns but you will have a great shot at getting those positive returns as it's a good area with good tenants. There are C or "junk bond" areas that offer the potential for really high returns but the likelyhood of achieving those returns are much lower, and possibility of negative returns are higher, as it will be a rougher area with rougher tenants. And there is the in-between.
I have a friend that is an agent who owns 20+ rentals herself and does rehabbing too. I have stayed east of Kingshighway with my rentals but I know she has helped several clients buy west and would know a lot more about prices of properties, rents and rehab needed then I can do looking at realtor.com. Since she does her own investing, she is WAY better than any agent that knows nothing about investing. Let me know and I can send her info to you if you don't have an agent and would like to view the property.
Thanks for the feedback. Please message me your friends contact info. Thanks
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