How does this deal in midtown Oklahoma City look?

7 Replies

Hey guys,

I'm not a brand new investor, but this is the first home that we haven't lived in before we rented it out.  That makes the analysis of this deal more important.  This is what we are looking at.  We have found a duplex in Oklahoma City in a neighborhood that is not deemed historical, but has the charm of one.  It is 1,810 square feet and they are asking $120,000.  One side is rented for $575 through October of 2018, and the other for $635 through February 2019.  The property does need some work.  It needs central heat and air added, a few trees removed that are encroaching,  some brick work and there is a double car outbuilding that is in disrepair.  The kitchens and baths are dated too, but livable.  With all of that said the neighborhood is great and fixed up it be worth $150,000 and bring rents of $1400-$1600 a month.  Is there enough room in this deal if we offer $100,000?

One thing that I am not sure about is how to handle the tenants.  We would probably fix one side at a time.  The one with the lower rent has been a long term tenant and doesn't require any upgrades.

Oh and as a side note, we have 2 properties in Edmond.  One we own outright and the other have a considerable amount of equity in.  We will pull equity out to do the renovation on this new purchase.

Thank to all of you Okies who know the midtown/downtown area for your eyes on this deal!

Amanda

in midtown street means everything,  where is this one located? send me a pm if you dont want to tell everyone your biz.  lol

Hey Amanda! 

I am going to take a wild guess and say that you are looking at the duplex on 19th St that just came on the market. I was actually just looking at that property myself this morning - props to you for jumping on it so quick!

I have not done a full in-depth analysis of this investment yet so I am just going to keep my comments general. The first thing I will say is that based on what you are saying needs to be repaired on the property, you could be looking at $20k in repairs - adding central heat and air will cost you a pretty penny. 

The other thing I will add is that I am not entirely sure how realistic your $700-$800/month per unit is considering it is a one bedroom. 

I would run your numbers based on a lower rent rate and see if the deal still make sense. If you think the property will eventually appraise at $150k, you may be able to pull of a BRRRR strategy on this one. You could purchase at $100k, put $20k into repairs and closing costs and then in a year if it appraises at $150k, a bank should lend you $120k on it which would pull all of your cash back out. This strategy may make sense for a property that does not have a huge cash flow potential, but has the potential to give you an infinite cash on cash return after a refi.

Hope this helped! I am not personally interested in purchasing this property so if you would like to discuss the numbers in more detail, I will be happy to do so! 

@Amanda Gragg
This is a great example of why I like the 1% - 2% rule as a {general} rule of thumb. It sounds like you will have the burdens of both renovations and inherited tenants. Without detailed analysis we can see this will (hopefully) barely break 1% which isn’t really worth the effort IMHO.

the other issue on midtown right now is there is a bit of a stall or downward trend in pricing for rentals in that area right now.  I chalk it up to oversupply but we shall see in the coming months, it may be a seasonal thing as well.

Agree with @Rhett Tullis on the trend in pricing in the urban core.  Could be seasonal, could be a lot of new build stuff coming on line, could be the phase of the moon (probably not) but it never hurts to be conservative.

Thanks for all of your thoughts guys.  We are seeing the same thing with midtown rents.  We made a low offer on this one and didn't get it.  No worries though because I didn't see a way for it to be profitable at their asking price.

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