Analyzing a Duplex in Wisconsin

12 Replies

I am looking at my first duplex.  Asking price is 134K which is right in line for other duplex in the area.  2 units, 2BR/1BA each unit.  Rents for $700 each unit which is slightly below market rent which is around $750.  Tenants pay for all utilities and also mowing and snow removal.  Long term tenants.   One tenant was in upstairs apartment for 17 years and moved downstairs 2 years ago and that is when upstairs was remodeled.  New roof 2016.  New water heaters.  Slightly older furnances but working great right now

Here are my calculations - let me know if I am far off

 Monthly rent  1400

Costs 

Vacancy 5%  -                  70

Property Tax -                  258

Insurance -                       125

Maintenance 5%              70

CAPEX 5% 70

*Mortgage                          567

*Trying to stay under 125K for purchase.

30 year mortgage with 20% down @ 5.5% interest

TOTAL CASH FLOW    $239 a month or 2866 a year

25k investment so 11.4 COC return? Am I seeing everything correct?

Really well taken care of property with some long term tenants currently renting which are making me like this property.

Any thoughts?

Thanks
Jason

@Jason Goslinga

Are you sure of the property tax/insurance numbers?

Property tax divided(258/134,000) by asking price is .002. I don't invest in wisconsin but that may be off.
Maybe the current seller is paying $258 in property taxes and it will be reset when a new buyer comes in?
again - I don't invest in Wisconsin but the insurance also appears to be on the low end. Did you get a quote from an insurance agent?

I also don't see a property management fee - you may plan to self-mange it now but you should bake in the expense.

Updated almost 3 years ago

disregard what I wrote - I thought those were yearly figures...silly me.

The property tax is actual.  3100 yearly or 258 per month.  The insurance is a rough estimate from my insurance guy.  he is supposed to get me a hard number later this week and will be contacting a few other insurance companies for quotes

I didn't put a property management fee in because I will be self managing this property

Are you doing an ACV or replacement value on the insurance? $1500/ year for ins in WI is crazy. If you need a guy, I have a decent one. He understands rentals and is on BP as well. I have ACV 110k, 5k deductible, @ $427/ year. Granted those rates may have gone up a lil, but not to $1500. You need to decide what your plan is, if you have a major loss. Do you wanna rebuild or just pay off note and walk away..... 

Check the current assessment value as well.  Sometimes they get way behind on assessments and the taxes go way up because the sale triggers a reassessment.  For example, the current house is behind on assessments and is currently taxed at 100K when you buy it for 134K all of a sudden the 250 a month in taxes become 350 a month and kills your return.

@Chad Nagel if you give me the name of your insurer that would be great.  I thought 1500 a year seemed a little steep but this is my first rental and I know duplex have higher insurance rates than houses. If I could cut insurance rates in half I would feel more comfro

I'm not sure to be honest because tax rates vary from place to place, and sometimes places are only taxed at 80% of value so I would get just call the assessor in charge of that location and ask if I bought a duplex for 134K, what would be the tax bill at the end of each month or year.

Originally posted by @Jason Goslinga :

@Chad Nagel if you give me the name of your insurer that would be great.  I thought 1500 a year seemed a little steep but this is my first rental and I know duplex have higher insurance rates than houses. If I could cut insurance rates in half I would feel more comfro

@Jason Bott Can you help this guy ? 

Thanks @Chad Nagel

@Jason Goslinga , I'd be happy to look into options for you.

I can not tell from your comments above, but will you be living there?  If so, you could be getting Homeowner quotes, not rental dwelling quotes that everyone else is referring to. 

A Homeownes quote will tie to your personal credit and has many beneficial coverages to cover your personal beliongins, etc...But the annual cost can be more than a Rental Dwelling policy.

Thanks for all the replies.  Decided to pass on this one.  Had some insurance come back and needed flood insurance because its by the river and just made it too short for cash flow.  Looking at different properties now.  Thanks for all the help