Duplex Investment Analysis

2 Replies

Just as a quick summary, I'm looking at a 2 unit property that is listed for $59,900. Each unit has 2 beds and 1 bath for a total of $1100 in rental income per month ($600 for lower unit and $500 for upper unit). The lower unit has a tenant with a 2 year lease in place and the upper unit has a tenant in place with a 1 year lease. The monthly expenses are about $200 per month including tax and utilities. I have access to cash, but I would rather purchase with a loan; but, I could use cash for a down payment to bypass the PMI. I was thinking about an additional $110 per month for property management and $200 per month to bank for maintenance costs. Even with another 10% per month for vacancy, it would still cash flow.

Any thoughts or opinions about the deal or recommendations regarding financing. I appreciate any feedback!

The listing description is below...

EXCELLENT INVESTMENT OPPORTUNITY!!! Duplex with 2-bedroom, 1-bath units. Downstairs unit rent is $600/month. Upstairs unit rent is $500/month. $1,100/month income, $196/month expenses includes taxes, insurance, water, trash. Two-year lease in place on downstairs unit, and one-year lease in place on upstairs unit. Both units have been updated with new kitchen cabinets, counters, and wood floors. New paint. Separate water, electric, and gas meters for each unit (owner pays water and trash). Updated wiring in kitchens and baths of both units. Kitchen appliances stay. Washer/dryer hookups in each unit. Washer/dryer in upper unit stay.

@Steve Adkins

I have no idea what the area or market is like where this property is located but your per unit costs of 30k are in line with the rents it is currently operating on. I wouldn't even consider the expenses provided in the listing. Do your own research for estimates. 

Depending on you holding period, you will want to set aside reserves for Cap Ex. 10% for vacancy could be too high/low for your market. On a duplex I like to take one units rent and divide it out over the year.  Find the taxes due on the local assessor's site for an accurate number and call an insurance agent for an exact quote, it's free. I would estimate water/trash much more than what has been provided. 

Determine all of your "fixed" expenses as much as possible. 

Check out this article for cap ex.