How are my numbers Duplex

18 Replies

I am considering entering a contract for a duplex that I found though Trulia. This would be my first investment property and my strategy is to buy and hold. Does this sound like a good deal?

Purchase price: 105,000

Down payment: 25% ( 26,250)

Interest Rate: 4.7%

Tax $1,764

Maint and repairs $1,500 (estimated, owner said it's closer to $1,000)

Renters pay all utilities and take care of grass.

I'll be self managing it

Both units are 2br/1ba. Rents are 620 + 635 = 1255

Vacancy 6% ( $-75) (Both units are section 8 and are rented now)

One tenant has been there 3 years, and other 8 years. I plan to leave the tenants there.

Isurance? not sure I used 850

NOI - $836

Cash flow - $428

Both units have already been inspected by section 8 this year, so I don't anticipate many repairs.

What are your thoughts?

Also what things should I look out for?

Thanks for reading!

Asking price was 125K

Contracted for 110K

Down payment was 25%

Taxes around 2K

Insurance 600/year

We also self manage, 2 beds/1 bath each side. We are raising rents to $700/side.

The rents have not been raised since tenants moved in between 5 and 6 years ago.

I think you have good cash flow, just keep an emergency fund in case anything bigger crops up like roof or furnace.

Section 8 is great, it does take a couple months to get the direct deposits set up into your accout, so be prepared for this.  At least that is the case in Michigan!  Also look at when the rent was last raised.  

Originally posted by @Izzi S.:

Hi,

What will your monthly cash flow be? 

What's considered acceptable? I am actually looking a duplex in MI now as well. 

Jack. 

 Cancel. Re reading the above I see the cash flow. 

Sorry!

How much is The Mortgage (interest and principal) .  What are the total expenses including Interest and principal  (I don't see the principal ?), Insurance,  vacancy,  repairs and cappex

How old is the duplex and what are you putting side for capital improvements?  Do you think you should figure for a PM even though you are not using one right now??

@Julie Haveman

Hello Julie, I have a question about Section 8... I saw that you said it was great.  Would you recommend for someone who is just getting started/looking for their first deal, get started with a section 8 property?  I'm assuming the cons to a section 8 are mainly just that they are typically in not so good areas and security/maintenance/safety might be issues.  

Any input would be amazing!  Thank you!

and good luck @Andrae Raymond , it seems like a good deal from the looks of it... if all the expenses are accounted for of course like a few mentioned.

@Benjamin Blackburn  Think of it like this.  If you were running a restaurant, after paying expenses (inventory, wages, utilties etc.) you wouldn't take all that is left over and put into your pocket(well I wouldn't but some might).  You would pay yourself a salary and then the rest you would put toward emergencies, growing the business, etc.  

As for real estate though, I would pay myself that 10% I would give to the property manager.  Since I would be the property manager.  The rest I would put back to grow my business.  Unless until I actually have a property manager then I would start to accept what is left over after everything.  That is just my viewpoint on it though.  

Originally posted by @Benjamin Blackburn:

@Julie Haveman

Hello Julie, I have a question about Section 8... I saw that you said it was great.  Would you recommend for someone who is just getting started/looking for their first deal, get started with a section 8 property?  I'm assuming the cons to a section 8 are mainly just that they are typically in not so good areas and security/maintenance/safety might be issues.  

Any input would be amazing!  Thank you!

and good luck @Andrae Raymond , it seems like a good deal from the looks of it... if all the expenses are accounted for of course like a few mentioned.

 Section 8 folks can take their voucher and use any place in the county. We have some very good neighborhoods with section 8 people in them.  What I like is direct deposit into your account and they almost always pay their portion on time because they don't want to loose their funding. You don't need to find a section 8 property, just find a good property and advertise your vacancy as accepts section 8. 

Very good advice @Nathan Patterson

When I factor in 10% of net income, I am left with $310 cash flow, Assuming there is a 6% vacancy. With a 12% vacancy, cash flow would be $242. Both numbers make me happy. Section 8 has a very long waiting list, so I expect my vacancy to be on the lower side.

@Barbara Goodman
With up front repairs I am not expecting anything major. It was recently inspected for section 8. Both units are in livable conditions and are rented.

Expenses per month $435. (tax, insurance, property management, maintenance & repairs)
Mortgage payment should be about $408 per month

When I see less than 500 a month it's hard for me to justify the risk. Meaning the max that can be made (cash not equity) is 6000 a year but the loss can be much more. 

Am I crazy?