Please advise me on this South Tampa Turnkey Duplex Analysis (Hot??)

19 Replies

I'm new to the game and building my foundation. Please look over my analysis and give me some feedback. I want to make sure I'm within bounds for my estimates. If you'd be so helpful as to run your own analyses and show me a thing or two, I would be indebted to you.

Zillow hasn't been updated with the price reduction from today. Reported NOI: $15,121, meaning claimed monthly expenses are $159/mo, which I'm assuming is property management at 11% of the rent?

Annual Rent Income (currently rented): $17,040

Property Taxes: $1852

Mortgage: $8220 (This would be assuming an FHA loan, with 3.5% down which is my goal)

Mortgage Insurance: $1200 

Property Management: $2556 (15% of rent)

Utilities (?) : $5400 calculated as $225 per unit per month, for the whole year.

Vacancy: $1704 (10%)

Total expenses = $20,932 BUT, I do not expect to have property management, and I believe utilities are tenant-paid because in one of the photos I noticed there are two different meters. This would bring me into the green by $4,064 for the year, and $338 per month. While I am still early in my learning process and have been looking for a duplex I can live in as well (whereas this one is fully rented), but this seems like such a legitimately good deal to me that I'd consider looking at buying options.

After the price reduction to $140,000 in the last few hours, the property satisfies the 1% rule. I started evaluating before the change, so it's as if they knew what I was thinking!

Please give me some pointers, destroy my analysis, or whatever you may.

My first question for you is where are your capex and maintenance numbers in that calculation? Yes it's "turn-key", but it's also 40 years old at this point and there's plenty of things that can go wrong. If you have to drop management to make it profitable then it isn't worth it. Check your area to see if tenants paying the utilities is normal. If it isn't then you likely can't count on it since they can just go elsewhere and not be charged for it.

I would like to opt out of property management for the experience and because the property is only two units. For capex and maintenance I would take 50% of my monthly cash flow, which would be based on the no-utilities and no-management number I came up with. I should have put that in there to start with, thank you for pointing it out. Utilities are my fuzziest area right now. Do you have recommendations besides simply asking landlords and people in an area in order to figure out what you suggest? I haven't found any good online sources for estimates of utilities or info on whether tenant pays or not. I've looked through a lot of rental listings and very rarely see mention of utilities being included. I really appreciate your input, Dan.

The only reason the opting out of the management is for the future. It's great to have the experience now, but what if down the road you don't have the time or desire to manage anymore. Just something to be aware of. 

It's good practice to put capex and maintenance as their own percentages within the analysis, not just as a percentage of the cashflow. They are similar, but cashflow can vary and it's best to know consistently what you are stocking away.

As for figuring out who pays utilities, what you've been doing works with looking at other listings. Make sure to compare to other multi family listings and not SFH since they are different categories. You can call a few management companies. Some can be quite friendly since they'll hope to get you on as a client in the future.

Hi Devon, I just want to point out you managed to spell your name incorrectly. Obviously the correct spelling is with an "o" not an "I."

Add a management fee back in to your calculation for two reasons

1-Your time is worth money.

2-If you needed to liquidate the property the potential buyers would be adding it in.

3-Property management is an expense that devalues the property and the seller needs to accept that fact.

4-The fact that you do not need property management is not an added value by the seller, it is an added value to you specifically.

I'd also set it up so tenants pay for utilities, always. As long as their are two meters for everything all ready on the duplex you should be fine. If not investigate the cost of doing that during your D.D. period.

If I were your agent I'd tell you to make an offer where you are comfortable with your ROI adding those expenses back in. 

Work it up in a small spreadsheet and send it in with your offer. I.e. Here is our offer, this is why it is our max price. Comps+ analysis.
Also- My mortgage partner may have a loan program you'd like. he can calculate the projected future income of the property as your current income when buying rentals. 

In general this looks like a decent deal. In that area keeping it occupied won't be an issue, and in 5-6 years you can probably turn it over to a new home builder to knock it down and put up luxury townhomes.

Thank you, @Devon Garbus . I'm afraid you're mistaken regarding the proper spelling of "DevIn," however, you made some great points that I hadn't considered. I concur that it's best to find a property you benefit from in worst case scenario (here, with all the expenses taken into account, even the ones I wouldn't use or didn't think I'd need). Thank you for your input! I love your suggestion about making a spreadsheet.

no problem.  Let me know if I can help with anything else

Devin, I don't hate the numbers from a house hacking perspective, I will just say that. This would get your feet wet for a few years and get you some income down the road. Speaking of being wet you have not taken flood insurance in to account. Last time I looked at the flood map this area was pretty much all flood zone. You will have access to MacDill rental pool but this is not hot South Tampa. Really think this one through and drive it. 

Well spotted @Doug Merriott

You will have to take out flood insurance with an FHA loan and it will be quite steep if the property is located in an A rated flood zone. Make sure you get a quote from an approved insurance carrier and add that to your numbers.

Allow me to agree with 3 things:

1) do serious DD on the flood insurance.  I have waved off on two properties in florida due to finding out the flood insurance price.  If you combine flood zone with hurricane insurance on a property it will kill cash-flow. (especially if the property is build on a wood frame.  

2) I'll pile on counting the PM in your calculations.  

3) Finally, Be overly conservative on your MX and CapEx numbers...on a 40 year old property you can only come out ahead. If you want to be exact, find out age of roof and HVAC and estimate from there using FHA numbers.

Good luck...I think this is possible, but just needs a little more research.


@Devin Beverage I agree with everyone about adding PM numbers back in, this is a mistake I made when buying my first properties.  I got lucky and they will still cash flow when I get tired of land lording.  From my little research on PM fees I think you are a little high, 8-10% is pretty normal from what I've heard.  I have a great insurance lady that I shoot addresses over to and she gives me quick quotes and finds things like @Doug Merriott wisely pointed out about flood zone.  Both units are currently rented with leases correct?  You will need to be moved in to be a primary residence so you will have to figure out how to evict one and choose who.  I don't like the idea of taking over tenants.  

@Adrian Smude Thank you for your suggestion on PM numbers. I've been trying to overestimate in general for my analyses to not make my first deal too risky, but it's good to know a realistic price. One unit ("newly renovated") recently started a year lease. The second tenant is month-to-month and is paying less ($695 vs. $725 I believe). I understand what you're saying about taking over tenants... Though I suppose a month-to-month tenant possibly isn't looking to stay for very long anyway, right? 

Speaking of month-to-month, I just looked at the Zillow listing which is now updated, and the seller has removed the mention of the tenants (though it's still on loopnet), has added more photos, and now says that both units have been remodeled. It sounds like this seller is pretty motivated. 

@Doug Merriott, flood insurance isn't something I had even considered! You can bet it's something I'll be looking into more for every other property I consider in the future. 

Thank you all so much for your input, it's invaluable to me. I will be following all of your advice and investigating the property further, and even if this isn't the (first) one, I know a lot more than I did and I can apply it toward my future prospects.

* I condone the D.D. on flood insurance wholeheatedly. Good catches.

I however can not condone the spelling of this man's name.

I have to disagree with the guy who said this isn't a good area of south tampa. Two streets over from this duplex Domain just built 4 SFH and had them sell almost instantly.

Rental and buyer pool also comes from st pete, and the numerous shopping centers/shipping centers/schools in the area.

South of Gandy gets a lot of flack but it is seriously underrated. While I don't do a ton of rentals I know the sale market is incredibly hot down here and getting prices close to north of gandy. One thing that does raise an eyebrow is that this property *is* on the MLS at a very reasonable price and it hasn't sold yet. In my opinion there may be something else going on with the property which resulted in the 30k price decrease in just 1 month of listing.

Granted it was definitely overpriced before. Let us know how it goes.

Maybe I missed something here but you will either need to put around 20% down if you keep the tenants or kick one out and cut your rental income in half if you plan on putting 3.5% down for an FHA loan and living in one unit. If you put 20% down and keep it rented you might make a couple hundred a month depending on flood insurance. If you put less down and plan on living in it, it's still going to cost you 4-500/month because 700ish rent isn't going to cover much.

@Ryan Robirds

I understand your confusion. I definitely still consider myself in the early stage of my REI career (learning as much as I can!), and so the main reason I investigated the property and built an analysis was to get feedback and see what I was missing, how well/badly I analyzed it, and whether it would actually be a good deal. While I would be ready to jump on a deal if I found one good enough, my timeframe for my first property is somewhere in the next six months, so I'm not necessarily looking to hop into the very first potential deal I see. For simplicity, when I evaluate properties like this one (half just for practice), I try to base my numbers on normal non-house-hacking situation where I don't occupy the property.

I understand that it's contradictory the way I posted my analysis based on an FHA down payment yet ran rental income like I was going to have both units filled with tenants. My ideal goal is to purchase a multi family property (3-4 units optimally) and live in one of the units for my first deal. That being said, I should have done this one with a 20% down payment, since there are only two units and forgoing the rental income for my own living arrangements would diminish profits -- my mistake. Thank you for pointing that out!

Anything west of Westshore will require flood insurance. the only exception is new construction as long as it meets elevation requirements. the same goes for anything east of MacDill in the SOG.

At this point in the middle of hurricane season, I would venture to say Citizens will be the only one to insure it. Most other companies have backed out of FL for HOI.

there was another duplex listed [97k cash] right around the corner from there.

Not counting property management is creative accounting, it's fake, don't do it. You need to pay yourself for your time. And the utilities should be billed to the tenants, not you. I don't think this is a slam dunk deal at all.

hi @Devin Beverage ,

I see the property sold. Did you buy? If so how is it working out? Why was the price cut so much?

If you did not buy, may I ask what made you change your mind?

Either way, hope you've been having some luck in getting started. Tampa is not easy to break into right now!!


@Danielle D.

I didn't buy it! It needed flood insurance and once I stopped trying to make it into a deal I realized (like some above) that it really wasn't such a great deal... As my first buy and hold property I want something "stupid" safe before I go into actual ownership. I've been navigating the wholesale side of things instead, and meanwhile hoping to find something I can get into "creatively," with a sandwich lease / L/O, etc. I'm not in a hurry to actually buy anything because the market is on the up and up. My plan is to build cash reserves now and buy next dip. You're definitely right about Tampa! Goodness. But the persistent will make it.

@Devin Beverage Thanks for the update! I think you were right to not buy. Now when I see those 'great deals' I'll know to consider a couple more things that I wouldn't have thought of before. Again good luck!!

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