Please tell me what you think!

11 Replies

Thank you all in advance. Here is the scenario:

Duplex, ~1800 sq foot total, built 1930s. New roof, 2 car garage with divider. Decent neighborhood.

Unit A: 2 bed 1 bath (partial finished basement with second bedroom), well cared for, no immediate updates needed. Central air. Has all appliances, working. Tenant is section 8, renting for ~450/month. According to tenant, has "absolutely no plans to move" and is "in good health". 

Unit B: 1 bed 1 bath with unfinished basement. No current tenant. Needs complete remodel including new windows, has window air only. 

After casual back and forth between our agent and theirs, it seems ~$85000 would take it. We have obtained estimates for complete upstairs remodel including paint, flooring, all new bathroom, windows, appliances, central air for $13,100.

Numbers:

85000 for duplex + ~1400 closing (after split 50/50 per agent recs), + 13,100 remodel = $99,500 total

25500 (down payment at 30%) + 13100 = ~38600 required up front

395.85 (P&I at 7%) + 180.36 (CapEx after remodel) + 222 (tax, insurance, vacancy monthly) = 798.21/month expenses

Anticipated rent: Unit A = ~450 (hoping for section 8 revaluation if become owners), Unit B (after remodel) ~600 = $1050/month

Final Numbers: ~250/month cash flow, 8% cash on cash, 3% cap rate

My questions:

1. Our small real estate company is just getting into this business and we are wanting a relatively low risk, modest reward property to get our feet wet. Although, in my opinion, 85 is just a tad high, it cash flows decent at this amount and serves an a good intro property. Thoughts?

2. How difficult is it to appeal for increased section 8 rent? My search so far has revealed mix results.

Again, thank you for your input!

D

What city is this in?

You need to be sure you are getting at least that $600 on that second unit.

Youre paying essentially $100,000 and will get "hopefully" $1,050/mo in rent.   That's barely 1 percent rule. Not to throw shade on what you're doing, but you can buy a duplex,....move in ready probably in Cleveland (like I do now), Columbus, Philly, Memphis or KC that already has tenants in it for $85,000 and has gross rents of $1,200 to $2,200 in a decent neighborhood.

I'm not an agent but probably plenty here on BP that can help you out with that.

Originally posted by @Austin Fruechting :
Originally posted by @Eric Adobo:

We are supposed to be supportive.

 Not when peoples livelihoods and careers are at stake. We should be honest above being supportive. 

 I'm just here to party.