I think i'm being pretty conservative on some of the numbers given the area but would like a second opinion on this duplex in Bath, ME.
- Currently renting for $940 per unit but given the craigslist/rentometer data, could easily rent for $1100-1200/mo
- Management costs are set at 9% in the given scenario but we may be able to find lower costs/fewer features
- Estimated water/sewer costs based on usage in the area and recently updated rate tables
Any help or advice would be appreciated. My overall thought: try to get the property for less (I know, right?) and ensure the monthly rental rates at $1,100/mo are achievable with current tenants.
*This link comes directly from our calculators, based on information input by the member who posted.
I'd strongly suggest you include at least some heating fuel, electricity, lawn care and snow removal expenses in your analysis. Even if the utilities are separated per unit and the tenants pay them you'll be on the hook for all of them if you have a vacancy in the winter, which you eventually will.
You might also want to throw something in there for attorney fees when a tenant needs to be evicted.
...and $480/yr for insurance? Sounds very low. Did you get an actual quote? I would have guessed at least double that amount.
@William Wironen something also to consider for the Bath Maine area. Your number 1 source of rental clients will come from Bath Iron Works. I’ve helped in a lot of deals in this area and I’m familiar with what these guys are roughly making for wages. I would say you’re are asking for the high end of their range for rental income at $1,100 and that will encourage them to start looking elsewhere or even to buy their own home unless you’re providing them with an extremely good rental unit (location to the yard, parking, recently renovated, yard, or any other reason like that).
However depending on proximity to the main shipyard and size of the driveway, you may be able to subsidize your income by renting out parking spaces on a month to month basis. Parking is horrible at BIW and being able to provide spaces that you rent out could get you $40-$60 a space each month. This may allow you to keep rents the same while also increasing your bottom line. #creativerealestateinvesting
I'd ask for the expense data from the seller. The MLS listing says the owner pays the oil bill which is a very large expense here in Maine.
The oil for my 3-unit in Lewiston was about 3k for 2018. Also, the 3-unit I'm currently under contract with in Auburn was over 5k for last year.
I figure $1200/unit/year if you're paying heat (which I think you would have to at $1,100/month rents). Be sure your comps aren't including the services you are excluding in your expenses (snow removal and lawn). Agree with @Ryan Murdock get a quote on that insurance too.
@William Wironen - I own 20 units in Bath/Wiscasset and am a licensed agent in Bath. I am familiar with this property and location. $1,100-$1,200 might be doable in the current rental market, though I would caution that the half dozen streets running perpendicular to Washington Street by BIW are among the least desirable places in Bath to live. It was not long ago that units like these rented for $850-$900, and there could be a very good reason they are at $940 today. I would not assume they are under market. 9% management is also about right in Bath. I pay 10% and am happy to do so for the level of service I receive.
@Ryan Murdock is right on. Heating fuel will probably run $3,000 per year or so unless you separate the systems and pass it on. I would expect insurance on a building like this to run about $1,000 on a business owners policy with good liability coverage. Bob Warrant at Midcoast Insurance is THE guy to talk to about this.
I need to refresh my memory, but I believe just 5% of BIW employees live in Bath. Just one of my 20 units is occupied by a BIW employee, and that unit is in Wiscasset.
From my perspective, this one might be an okay owner-occupied situation if you want to be in the South End of Bath, but I wouldn't touch it as an investment.
Sorry for the typo, Bob Warren. Hope he didn't see that! :)
@Ryan Murdock - You're completely right with the other utilities/snow removal... especially during the winter months and vacancies. Apparently it's been too long since I've been home. Also, you caught a major typo on my part, not sure how I missed it during my initial review.
@Garret Getch - I hadn't thought about the additional income for parking. Not sure it would work out with this one since it appears to be a single lane driveway but for future properties that's a fantastic idea.
@Mike Roy - Thanks for confirming the management percentage I carried. I had done a little research but they vary significantly based on what you want to happen. Makes me feel a lot better knowing that my estimate wasn't off. I'll have to keep Bob's name handy for future conversations and analysis.
Everyone - thank you for the feedback, it's helped see the property from totally different perspectives. After updating the numbers to account for the recommendations here, I'm not sure this is the right property for me. But, I have a whole bunch of notes to ensure the next one is more closely aligned with that I'm looking for.
Nothing to add. Used to live in Bath as a teenager. Dad was from that area. Wished I knew then what I know now. Would have bought some properties straight outta high school. Could a, should a, would a. Lol
@Mike Roy Hello Mike, Could you give a recommendation for PM in Bath? Sea Glass and Rentex seem like the go-to people Although I don't know anyone that has any experience with either. Thanks!
@George Sprague I will send you a direct message.