Buying a HUD half duplex for $142000 in Shawnee KS. The other half sold for 165k earlier this year. Putting 25% down. Managing property ourselves. Going rent in the area is $1400 a month.
Monthly expenses are $891 (tax, mortgage, cap ex. repairs, vacancy-5%). I calculated $100 a month for repairs just in case. And we are approximating 5k (I'm being conservative) to fix up minor cosmetic issues (we already had an inspection). Closing cost 2k.
I calculated Cash on cash..came up with approximately 11%
Is this a decent cash on cash? I'm a novice at this and hope I calculated the numbers right. Please help me out 😊
Can you itemize out each of your expenses that make your $891 total? That way I can better see the numbers you are working with and evaluate the deal better.
Expense breakdown monthly (although the going rent is $1400, I calculated based on $1300 just in case):
Comes to $894 (not 891, sorry)
Did I miss something?
You missed insurance and utilities such as water and sewer.
What happens if the roof needs replacement, you only owning half of the duplex?
While you mentioned your numbers are conservative, I would increase them a bit more to cover your absolute worst case scenarios. Particularly the vacancy/repairs. You also missed the capital expenditures (not the same as repairs). I recommend 8-10% per. Also, even if you're not intending to use it, I suggest accounting for the prospect of a property management expense (you never know). Best of luck!
Do cap expenditures actually go into the cash on cash equation? I will have 5k set aside for that. But I'm reading that cap exp shouldn't count against cash flow because it increases the value of the property?
I calculated $100 for insurance a month...cas on cash is now 8.5% at $1300 for rent. If we get the $1400 for rent that we hope we can get it's still at 11%.
Yes, owning half the duplex. Our goal was to buy a full duplex but they go fast here!