Over anaylsis: OK Cash Flow or Too much buffer????
So to preface this, an investor is trying to get out of the business. He has 8 properties. Im looking to buy two. I would of liked to get all of them but he thought we could start with two and go from there. HE CHOSE the the following two cause he stated they cash flowed the best (but he has them free and clear). Here are the numbers:
1st property is a duplex. Currently fully rented at $800 per side = $1600 total. One side is on a month to month (probably will be leaving in the near future and the other side is only into a 1 year lease by a few months.
$1600 (Income) - $550 (Mortgage) - $350 (HELOC for downpayment and closing) - $350 (Taxes) - $160 (PM) - $120 (insurance) - $80 (Repairs) - $80 (Capital Exp) - $25 (Garbage) = (-$100) negative cash flow
There are a few things that could make this better:
- Im estimating high on the mortgage at 5% (property is being sold for $130K). This could be less maybe 4.5% and maybe get purchase price to $120K???
- I have a downpayment available but maybe not in time to close. So the HELOC could be a short term thing if numbers dont work out.
- The property today is worth $150K. Very similar houses are going for $75K each side. So there is equity in the property now. Should I push to get a better deal knowing that Im also getting a 2nd property from same investor? What is typically the investor "discount" under retail that you shoot for?
- Current property manager that this landlord is using charges 7% not 10% but uncertain as to quality of PM.
- Its an older house that he stated was updated not too long ago. Is $160 a month good to hold for this??
Please let me know what you guys thoughts are. Very interested in understanding what you would do. Thanks in advance.