Duplex - low income rental property

[Ryan Melander]

BP community!

I would like to get your thoughts on a duplex in a low income area.

This is a property in Louisiana in an oil and gas town, so it has room to grow.  The property currently has a contract with the state housing authority which pays the rent.  From my understanding I will be able to renew and extend this contract up to 10 yrs.  The appreciation for this property would be very little in this area of town (would be my guess). Here are the numbers.

Sale price = $95k

Rent = $1740/month

Insurance = $4k/year

Closing ~ $2k

Utilities = Paid by tenant

Monthly Income: $1,740.00	Monthly Expenses: $881.53	Monthly Cashflow: $858.47	Pro Forma Cap Rate: 10.84%
NOI: $10,301.60	Total Cash Needed: $97,000.00	Cash on Cash ROI: 10.62%	Purchase Cap Rate: 10.84%

Note: These units are low maintenance with fairly new ovens, microwaves, and fridge. Roof is 10 yrs old and the property was build in 2005. Also, this will be a cash purchase.

I've ran the numbers, it passes the 50% rule, and its ~1.7% or the 2% rule.  

Would you purchase this property as your own investment?

[Jessie Tetreault]

Are the vacancy, maintenance, property management, cap ex also being factored in with those expenses? Also that insurance seems very high too me. 4K a year? Is it a flood zone or something? If I was going to invest in a low income area I would want to see more than a 10.6% COC return. That's just me.