11-12% IRR - should I make this investment?

Question

I'm on the clock to buy my 2nd rental property (a duplex) and I'm calculating a 11-12% IRR over 10-20 years.  I want to buy and hold.  I often see 15% as the required rate of return for real estate investing.  I have a lot of time invested in this property already and feel like I understand thoroughly what repairs will be required.  I like the area and rental climate.  It is an older house that I intend to put $15-20,000 into right away to address a structural issue.  I use conservative growth figures (2% rent escalation, 2.5% appreciation, 5% of rent for repairs, etc).  Should I walk, or buy it?

Alexander Felice · Answer

you're gonna pass on 11% to hunt for 15%? What if you don't find one?

Don't pass on a eating a great steak because someone told you only to eat unicorn.

as for this particular property, not enough information to give good insight, but I rarely recommend people to pass on deals that make money.

Ben Wilkins · Answer

@Christopher Phillips has the right of it - we would need to know more numbers before we can really give much of an answer.

While @Alexander Felice has a good point, it will really come down to what you are looking for in an investment property. Set your criteria based on your market and to match your goals. If you say that you require 10% ROI, then stick to your criteria. If you are unable to do that, then consider a different market or different criteria for your current market. If you start bending on your criteria, you can run a slippery slope.

To put Alexander's words a little differently - choose if 11% fits your goals, and don't set your goals to a mythical number that doesn't appear in your neck of the woods. If you set unrealistic criteria, you'll make far fewer purchases. A "great" deal in your area might be 11%

It is better to change your criteria and stick to it, than it is to continually stray away from them.

Christopher Phillips · Answer

@Andrew Larson

We can't say yes or no without seeing any assumptions/numbers.

Rent $, mortgage $, utilities $, vacancy %, maintenance %, Capex %, rehab $, cash on cash return $/%

Andrew Larson · Answer

Also, multis are hard to come by in this market.  Supply is low.  I missed one 2 months ago.

11-12% IRR - should I make this investment?

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