Should I buy this duplex? Based on the numbers.
Purchase Price $82,725
Duplex, 2 bedroom, 1 bath each side, 4 Bedroom 2 bath total, with unfinished basements. All separate utilities paid by the tenants. The building is brick with just one story and the basement unfinished with washer and dryer hook ups.
Here are my costs.
Transaction costs:
Appraisal $450
Inspection $450
Title and Loans Costs $2000
Monthly Costs
Insurance $91
Taxes $125
Vacancy $213
Repairs $75
Cap Ex $125
Management $114
Mortgage $312 ($530 with escrow)
Total = $1055
Rents - It is currently leased through 2018
Unit #1 = $675
Unit #2 = $750
Total $1425
Cashflow
$1425 - 1055 = $370
Cap Rate
($370 + $312 Finance costs) / $82,725 = 9.8%
Down Payment 26% = $21,975
Cash to Close = $22,395 + 450 Appraisal + $450 Inspection = $23,295
We got a few credits from the sellers so this is the final cash to close after everything is figured.
Cash on Cash Return
$4,440 gross rent / 23,295 = 19%
The property is in Wyandotte County where duplexes go anywhere from $60,000 to $100,000 on average, depending on all the factors.
I feel good about the numbers. We had the property carefully inspected, so we have a good idea of what capital expenses we will need to be ready for down the road. We will have a furnace to replace soon. We got the list price dropped from 90K down to account for a few future repairs. Besides that, the units are updated with remodeled kitchens and bathrooms. The tenants are clean and they mow the property and generally take care of it. I already have a Fourplex 2 minutes from this duplex. I have been watching the market for two years for a deal while saving. I have been making offers for the last 5 months and was beat out by a few other investors several times. I took a 30 fixed deal at 4.625 with 25% down. It's a hefty downpayment for a new investor. But the property is rented and has been taken care of so I don't mind paying a little more for a property that is already performing. Anyone have feedback on my calculations? I think I did the math right for cap rate and cash on cash return.
I am interested what other investors might think.