Looking at a Fourplex

[Brad Gibson]

Im currently looking at a Fourplex in West Texas.

Unit 1 -- 3 BR 2 BA

Unit 2 -- 2 BR 2 BA

Unit 3 -- 3 BR 2 BA

Unit 4 -- 2 BR 2 BA

All four units are rented at $625, $525, $625, $525.  Total monthly income is $2300.  It has a new roof.

List price is $114,000.  I would say the property is a "C" or "D".  Tenants pay all utilities.  The area/neighborhood are not in the growth path of the city, so appreciation will likely lag.  This is a pure cash flow play.

Here's what I'm looking at 90% occupancy rate.  

$2,760 per year in management

$200 in accounting and legal

$3600 per year in repairs/capex

$1200 in insurance

$2,667 in taxes

$5,508 in debt service after 20% down

From those numbers, it looks like it might cash flow over $10k per year which would be a really nice return on equity.

Any thoughts for a newbie? I don't know how insurance treats duplexes and/or if the financing will be different than a SFR. I already have a $1 million umbrella policy.

Thanks in advance.

[Jordan Sutherland]

You aren't the first out of town investor to ask about this property on BP. I've looked at the property and was slightly afraid to be there. The area it's in is declining, and in my opinion, will never be a desirable place to live, even for lower income people. It's definately a D property. The numbers look unreal and maybe if you put some money into it for renovations, etc. It wouldn't be all that bad. The problem is that almost every building on the street and nearby blocks are all run down. It is not a place I would feel comfortable going to at night, even with a gun. Units that are occupied in the area are most likely occupied by very undesirable tenants. I think it's a very risky purchase, but it could make someone some good money.  Who knows? But I will tell you, there's a reason why that fourplex has been on the market for so long.