Newbie Deal Feedback - Arkansas Duplex

3 Replies

Hello BP!

Found a duplex in Centerton, Ar that is going to provide $488 cash flow/$244 per door with 20% down. The property is currently vacant. I have two questions:

- Is it beneficial to invest in a vacant property? I understand that it gives you the opportunity to raise the rents to market rate and/or fix up the property. 

- Vacancy has its own amount of risk associated, what factors can you look at to mitigate? What happens if you can't rent out the property? Population growth is close to 7% and income is raising 8.5%. Anything else that I am missing?

Thanks, 

Yasmin 

Honestly everything I buy is vacant! Occupied is my concern....

Centerton, Ar is in the nw corner of the state , that's where the growth is happening here.

I haven't had a property I couldn't rent out!

If it cash flows and it's not in a war zone!!!

@Yasmin Shakhshir I agree with @Ray Fisher , there is more to be concerned about when the property is occupied. I have purchased both vacant and occupied properties and I would rather it be vacant so I can vet my own tenants. I luckily haven’t had any issues with the properties where I inherited tenants, but I would rather buy it vacant and have complete control. Just make sure its not vacant for a reason that you can’t fix (bad neighborhood, undesirable area… next to airport, pig farm, flood zone, etc). Have a proper inspection done

Mitigating vacancy boils down to two things, make repairs or reduce the rent (assuming you're marketing properly).

Do your research and understand what renters in Centerton expect and check out some comparable rentals in the area. If you have trouble renting it out conventionally, maybe have a backup plan to make it an Airbnb or furnished corporate rental. With Walmart HQ and Tyson in the area, there may be a demand for that type of property pushing West into Centerton. Good Luck!

Yasmin, 

Centerton is a good area, of course all of NWA is growing. The appreciation, of course, in NWA is attractive as well.

Things to consider would be age of the house, such as the big things like HVAC or the roof.  You are already expecting the property to be vacant when purchased, so you will need to account for holding costs, but will other big costs be associated in the near future such as these types of repairs --inspections can really be life savers.  You might also want to look into different types of insurance whether it be umbrella or some other type, which is another added expense.  

Also, have you considered if you are going to manage it yourself or have a company do it (as well as with the repairs)?  You can spend a lot of money on little service calls that eat away pretty quickly at a cash flowing property. 

I know BP has calculators (and tons of quick forum reads) that might could help when it comes to running the numbers on a property such as this.