2 properties, new to REI, need advice.

[Justin D.]

Hello,

I'm new to REI, a month ago I wouldn't even know what REI stood for... I am looking at two properties, in the same area.

Duplex:
Listed 67k
2 BR UPR 425, includes washer, dryer, stove and ref
3 BR LWR 675 includes stove, dish, ref
Rent $1100

New roof '10, boiler and baseboard heaters '09. All electric rewired in base, (ties into old going up) breakers installed in 2nd unit, wireless smoke det, water tank '10, plumbing '08 (copper with galv) carpet '08, most major work done, quite a few of little things need work, owner is doing that now.

Taxes $2500
Ins ?
water ?
Tenants pay electric and gas.
loan would be about $250/mo 45k @ 5.75, 30yr, 3k closing

6 unit:
4 2 BR $650/ea
2 studio $450/ea

2010 figures
3500 rents
5768 taxes
1500 ins
2244 heat
3600 electric
1500 water
1218 total monthly

All brick 3 story, no landscaping, new furnance and half roof done in '05, all kitchen and bathroom remodeled, new windows, flooring, entry doors, carpets, coin laundry, stoves, refs, and smokes done in '06
appriased 165k in '07, asking price 172k rents include utils, looks to be turn key, fully rented, no work needed, inspection tomorrow 3/19/11, i know it has older BX wiring and asbestos wrap around the heat vents between walls

I can get a comm loan. for 6% @ 25yr, with .25 $921/mo

Thanks for your time,

Justin

[Will Barnard]

Justin, from the figures you provided, here is what I see that should be looked at very closely.
It is said, that over time, your expenses (vacancy, operating and capital) will average 50% of gross rents.
In your figures, you have only allowed for 5% vacancy which is pretty low and most likely a best case scenario over a long period of time. You also have very high taxes for this property and looks like owner paid utilities. This can be a killer. With such higher expense numbers (utilities & taxes) you will likely experience much higher than 50% expenses of gross rent.
You have placed $0 for repairs/maintenance - if you plan to hold this for many years, are you saying you will never have a repair that costs you money? You also have $0 for adminitration, legal andf other items. Are you saying you will never have an eviction, never have advertising costs, or never have to purchase office supplies or pay accounting fees?

Food for thought!