Duplex with great +ve cash flow !!

2 Replies

Hey Folks 

In the process of buying a duplex in haddon height Nj, I'm a total newbie when it comes to buying properties in the states and becoming a landlord. 

It a 3 bed 1.5 bath with W/D and finished basement in one unit and a Single bed and bath without W/D in the upper unit

Its both the unit pull in about $1500 (Long term tenants) and $850 mon on mon . Total cash flow of $2350 per month 

 Im planning to move in and rehab the upper unit . Move out after an year and rent it out the unit 2 at $ 1000 - By adding W/D, cabinets and giving it some TLC

Buying cost : 226000 with 6 K back at closing

Doing FHA 30 year at 3.25% Monthly payout including P&i +PMI , insurance and taxes works to $1800.84

Electricity paid buy the tenants. Water and Gas are paid by the landlord. Water comes to about $65 a month and Gases at $164

The property has almost new HVAC , 8 year old roof , has older window its 63 years old 

Wanted to know if this is a good deal. Home inspection and comps see to be good . This is my first stint in to real estate investment . My goal is to keep buying rental income properties to generate +ve cashflow and attain freedom by generate passive income in the next  5 - 6 years . Hope im making the right decision. 

Looking forward to hear from you all . 

- Hari

$2350 a month is not your cash flow. Thats your gross rents. Cash flow is what's left after all expenses and debt service are paid. You list your PITI at 1801 a month. Some folks would say that your cash flow is $2350-$1801 = $549 a month. Personally, I call that "phony cash flow" because it neglects all expenses except taxes and insurance and ignores any capital expenses and vacancy.

I'm not sure what the debt services part of your payment is. That's just the principal and interest, and in your case PMI, not taxes and insurance. I'm not even sure what your loan balance is. Sounds like its $226K plus closing costs plus $6k you're getting in cash. So, I'm guess it at $236520. At 3.25% for 30 years I get P&I or $1029. That puts PMI, taxes and insurance at almost $800 a month, which seems very high. So, I'm going to guess that P&I + PMI is $1300 a month.

If you use a PM, I estimate your monthly expenses, capital and vacancy at $1175 a month.  If you self manage, its more like $850.  So, with self management your cashflow is $2350 - $850 - $1300 = $200.  With a property manager, your negative $125 a month.  Given you have little into the property (as far as I can tell), its OK if you're self managing.