Investor · Renton, WA · Member since 2016 · 10 posts · 0 votes
I m in the process of closing on my 1st duplex!! I m looking to get some feedback and see where my potential shortfalls could be. Currently both units are on a month to month and are renting out for 1200 apiece. Even with me assuming 20k to fix some things I was being conservative with keeping the rent at 1200 at least for the 1st 6months or so. Rentometer says average rent for 3 bedroom is 1621. I will be handing the property management so no fees there. Again please ask questions and point out any underestimations and tips. I.E with the kitchen cabinets could I just get new counter tops and cabinet doors without all new cabinets? Is Allure Vinyl the best flooring choice? What small upgrades are the biggest return on rental units.
Investor · Renton, WA · Member since 2016 · 10 posts · 0 votes
9y
Scott
That's if I leave it at the current rent of 1200 and still put 20k in. If I were to rent it at market rate of 1500-1600 my cash on cash is a little over 9%. Also exiting with 80k profit after 40 isnt a bad thing
I agree with @Scott Weaner. This is not a good deal based on the numbers you provided. 3 main reasons:
1. It is not close to meeting the 1% rule. $335,000 purchase price X .01 = $3,350 target monthly income. Current income is $2,400.
2. The 50% rule analysis for Cash Flow is negative. -$118.22. I would stay with this conservative analysis until you can verify hard expense data that says otherwise.
3. If you cannot get 10% or better COCROI then I would move on.
The purchase price is way too high for the stated rental market rates. Have you received comps from a Realtor confirming your ARV ($350,000)? You do not use Cap Rate for a Duplex.
You also need to list all of the expenses you are using in your analysis. I would strongly recommend you keep Property Management as an expense (even if you are self managing). You may want to have a PM in the future. So you would want it to still Cash Flow the same. Besides your time is worth something, right! Additionally, if you were to sell the property in the future other investors would include it in their analysis.
Real Estate Investor · Haverhill, MA · Member since 2016 · 27 posts · 10 votes
9y
I think in your market with rents in the 1200-1500
for a 2BR you should be looking at a price point of 240-270k for a duplex. At that price you will find your ROI at a much more desirable rate.
Real Estate Agent · Willoughby, OH · Member since 2014 · 560 posts · 690 votes
9y
I agree with @John Leavelle and @Scott Weaner . You should really do your calculations based on current rent, not a future hoped for figure. If something doesn't come even close to the 1% rule, I rule it out within the first 5 seconds.