About to make my first jump. Go for it or nah?

[Paul Ho]

Deciding to go for this deal for a rental use.
Still have no agent to represent me for this as this is my first deal approach.

Duplex 4BR 2BA each

Listed Price: $99,900
2 Tenants currently renting $800 & $750

So using the 50% rule 

Income $1550/ 2 = $775

30 year 10% down (parents sparing me money) with 4.1% interest $435 monthly

$775 - mortgage ($435) = $340 Cash Flow.

Now the area is not the nicest of Atlanta (Fulton county)

No HOA fee

Should I go for it?

[Azeez K.]

Hi @Paul Ho

Rent Assumptions 

A: Annual Rent Revenue $18,600 (Monthly Rent $1550*12)

B: Vacancy 10% 1860

C: Effective Gross Income = A-B $16740

Opex - 50% Rule 

D. $8370

NOI = C-D = $16740 - $8370

Total Debt Service = $7981 (Downpayment 10% Interest Rate 4% Term 30 years)

Cumulative Cash Flow YR1 = NOI - Debt Service = 8370 -7981 = $389

Cash on Cash Return 3.2%

Cap Rate 8.4%

DSCR 1.0

Overall you will cash flow based on this deal. Is this owner occupied? Any restrictions on the property? Are you buying under your name or LLC. If you are buying in your name you can get lower down payment might be a little difficult. If you are doing 10% you will have Private Mortgage Insurance that will essentially be a fees and won't add to equity. If you are buying under an LLC you will need to put 20%-25% down. Interest rates are going to be hire for LLC 5% range. Typically banks look for DSCR of 1.25 however, since this is 2 units and assuming you will buy in your name you should be good.

Good Luck!