Duplex near downtown analysis correct me if I'm wrong.

4 Replies

So I have 2 duplexes near downtown that I'm interested in. I'll do them both in separate posts but here's the first one.

FINANCING WITH FHA

3.5% down

Interest rate at 3.75%

30 year

*********************

2 bed 1 bath each side

DUPLEX ASKING $124,000 (I ANALYZED AT A PURCHASE PRICE OF $110,000)

GROSS income - $1,325

MORTGAGE (insurance and taxes included) -
$710

(Tenant is responsible for all utilities) EXCEPT owner pays sewer and trash.
I put down $50 for that.

VACANCY 10% - $135

REPAIRS + MAINTENENCE - $70

CAP EX 5% - $120

PM 10% - $135

Not sure I got the cash on cash and cap rate right but this is was I got;

CASH ON CASH - 3%

CAP RATE - I got 84%

Let me now what you guys think. I feel like I did it right but would ya'lls thoughts and opinions. Thank you

@Jonathan Perez After you subtract all expenses ($1220) from Rent ($1325) you have $105/month or $1,260 annually. This CoC return is 32%.

Cap rate is NOI/Value of Asset. Sooo $1,260/$110,00 in this case is only 1.1%

If your numbers are accurate for your area, then that's what your numbers would look like. Although it looks like your repairs and maintenance are only 5% of your Rent.. (usually recommended to include 10-15%, same with CapEx.... But then again, you are the expert in your own farm area.)

Any further questions, just let me know!

@Kyle Scofield thanks for responding man, I appreciate that.

So of course these numbers are at the purchase price of 110k, I should purchase at a price that obviously makes more sense. 110k would be over paying, I'm assuming right? I just ran it really quick on a purchase price of 95k and the cash flow went up from 105 to 125.

I do plan on house hacking it like you did as well.

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Cap rate is yearly net operating income dived by purchase price.

Net operating income equals gross income minus expenses before debt service.

So ($1325-$410) times 12 divided by $110,000 equals 9.98% cap rate.

Since I'm on mobile, those numbers were from memory (can't see your post as I type), but you now have the equation.