Help me analyze this deal

16 Replies

I would definitely buy this property providing your income is correct. On Google, it looks like the yard, sidewalks and driveways are thrashed and you did not put any money in your breakdown for repairs. Regardless, any time you can get a GRM lower than 8 you are probably getting a super good deal. I am not so sure that duplexes are price according to the GRM.

I don't like your breakdown and I don't use 'Rules Of Thumbs. I don't see much money for closing costs and I do not see anything for property taxes and insurance. In California we have a 1% Transfer tax and several other fees.

Thanks for the feedback Jack.  I’ve got $1800 in annual property taxes, $4400 in closing costs and $2000 in repairs. I’m thinking Rentometer might have quoted inaccurate rental numbers, won’t know for sure till I talk with the listing agent.

That property must have the lowest property taxes in the country since the average is a little more than 1% and I think in some states 2% to 4%. I did not see property insurance, trash removal nor water on your breakdown. Most duplexes have only one water meter and the owner pays for water.

Things are too far skewed to make good analysis. Income seems high, Taxes are too low and some expenses are omited. Rework your numbers find the missing pieces and then ask for help. It looks like a great deal right now but it will look not as nice as the real expenses are figured out.

@Alex Theriault The last tax assessment was in 2018 for 149k... Looks like 2019 was skipped. When the town finally catches up with there assessments be prepared for that tax bill to likely jump up $1,000 plus, that being said it would only equate to 90$ extra a month or so. 

Look on Zillow for comparable rents. In that town a brand new 2 bedroom apartment with granite and top of the line appliances is renting at 1200$. Majority of the other 2 bedroom rentals are all under 900$.

To get a feel for some recent comps in the area check "678 31st St, Ogden, UT" and " 242 N Harrisville Rd, Ogden, UT" both are multi families with slightly larger sq ft and close beds/baths count. Both sold early summer for less. 

Goodluck!

My charts come from a MS Access database I created. You can see how the software works by going to youtube and search BLPREI. I give the software to anyone who wants it for free.

@Alex Theriault

After taking a quick look, these are the immediate rental comps (26th St & Eccles Ave) that I found based on square footage and bedrooms/bathrooms. Based on these, you're looking closer to $3,150 in rent for the property. Which is a pretty big difference than the $4,470 you had originally. That now puts you at $787.50 a unit. As an important note, I am evaluating this deal on a per unit basis rather than by looking at the whole property.

 Intuitively, that rental number is supported by the discounted rate the tenants are paying. I think that it is more realistic to lower the rent by $112.50 ($787.5 - $675 = $112.50) than it does to lower it by $442.50 ($1117.50 - $675) for the services rendered.

Additionally, let's say the property gets appraised for the sales price of 370k. Appraisals and sales price aren't always the same, but for the sake of being conservative, let's say that's the case. The taxable amount in Utah is 45% of the appraised value (370k) which equals 166,500. $166,500 * the tax rate (0.01591%) equals $2649.01. $2649.01/48 (per unit & per month) is $55 a unit in taxes per month. Previously it had been $37.50 ($1800/48). So you have conservatively increased your taxes by 33% (55-37.5 = 12.5 and 12.5/37.5 = 33%)

That's not to mention the expected CapEx and repairs on the property. It was built in 1948, so more than likely you will have higher maintenance costs than if you were to have a newer property. With that in mind, when were the last CapEx repairs done? Looking at the picture, it seems like the property has been updated, but unsure about the most recent renovations.

At first glance, the numbers look really good on this property, and you're doing the right thing by doing a thorough analysis first. It seems like you're on the right track with your own investigation. Looking forward to hearing what you decide to do!

I can't tell for sure what your property taxes are but it looks like 1.5% and the taxes will be $5500. I make the rents more realistic at $1500 per unit. It looks like the property needs some rehabbing and I put in $40k.

I don't even know if my chart numbers are correct. I developed the chart and I have a hard time understanding the math. Perhaps, some math expert can check the math.

I would not buy this property with these new numbers.

Here is the trick. Maybe, I would buy this property and maybe it could be a goldmine. The thing you need to know is what the property will be really worth after rehabbing. If this property will really have an ARV of $470k I would definitely purchase the property because the big money is in the ARV when it is higher that the purchase price and your rehab costs are not high and the profit is in appreciation due to the rise in housing prices and due to increased annual rents when the Gross Multiplier applies.

This is how it looks with an ARV of $470k