I came across this duplex(Built 1900) by meeting another investor who owns about 30 properties in this very solid rental area in the albany, NY area. He stated that he was sellling this particular property because it was the first property he bought and he would like to use the equity to start flipping.
He told me that he was looking for 130,000. It is a 2BR/3BR w/ 1 BA each , up and down. The only major that it needs a roof. I will also be self managing the property which I didnt consider in the analysis. He also stated that he passes the water bill on to the tenants. This is something that I need to confirm with a few realtors but I didnt include that here either.
Here are the #'s if I could possible get it at 120,000:
35,000 Out of Pocket
Rent -750/850 Month= 1650/mo
8 % Vacancy = 132/mo
Effect Gross Rent = 1518/mo
10% Mngt Fee = 152/mo
Insur. = 83/mo
Maint./Cap Ex.(13%) = 197/mo
Water/Sewer (Actual)= 88/mo
Lawn/Snow Removal = 50/mo
Prop taxes = 311/mo
Total Oper. Expenses = 881/mo
NOI = 637/mo
Mortagage @ 4.25 = 443/mo
Monthly Cash Flow = $194/mo
Annual Cash Flow = $2329/yr
Cash on Cash 6.66%
Im waiting on an estimate from 2 contractors(referred by other investors) for the roof but based on their experience it will probably run around 6,000. if its a standard shingle replace.
My first feeling on it that its lacking but Ive been running #'s for the last year in this area and the comparable have been around 130-137,000. It seems like most of these listed properties have been sitting on the market for awhile with the seller just waiting for the retail buyer to come through. Im not sure that I can find anything better without having to manage a rehab which I dont have time for with a 20 mo. old and my wife due in a few weeks.
Any gut feelings? Thanks,
I agree with @Matthew Cole - the house is old. Im always skeptical of investors that are looking to offload their properties. Why would anyone get rid of a good performing asset? My guess is that he/she knows that that money can be better invested elsewhere.....
Electrical and plumbing were updated about 20 years ago. The basement is bone dry with no signs of foundation damage. Its just so tough to find cash flow. The MLS has ridiculous prices which has forced me to start calling apartments listed for rent to see if they want to sell.
All depends on the neighborhood. You dont see many 3br/2br in albany unless they where conversions from single familys. Most duplexs are 3/3... Make sure its a legal duplex!...
Lastly, Taxes seem low for albany and id love to know who does your snow and grass for $50 a month!
The house would be too old for me.
I wonder what "updating" the pumbing and electrical actually means. I certainly would have an electrician and plumber look at it before I even thought about buying it.
You don't want to renovate but with a house this old I am sure you will be doing a lot of that.
I would certainly bid lower then $120.000 for this one.
How about other duplexes in the area?
Have you given any of them a bid low enough so you cash flowed better then this one? it sounds like one of them might be ready to negotiate with you.
6.6% is really low. Way too much hassle for that rate of return IMO.
I wouldn't do this deal either. I personally want $200/door or I won't consider it. Everyone has their own preference though. I have found deals with these numbers, however they needed extensive work and most good contractors in the area are extremely busy right now, so I've passed them up. The MLS in our area is tough to find anything good!
I would add a cap ex into your numbers as well. I use 7% for the century old homes. This might be high, and maybe others can chime in on what they use. As a previous owner of a 100 year old rental, things WILL break. For example on that house, I had to replace the front door. Sounds cheap until you realize way back then door frames were much taller than modern homes, and the walls were crooked. Had to pay a contractor $$$$ to construct a custom frame. Also had to replace the original cast iron drain pipe. Not cheap either. Only good thing is it's a tax write-off on these things.
good luck on whatever you decide to do
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