Advice on duplex deal -- do it??

Question

Details:

Duplex built in 1940. Each unit rents for $600. Window a/c units, there is no central a/c. Self-managed.

P&I, tax, insurance: $561

CapEx: $100

Repairs: $100

Vacancy: $60 (5%)

Water & trash: $55_________________________________________

$876/month cost

So, $1200 (monthly income) - $876 = $324/month = 324*12 = 3,888

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Down payment: $24k (20%)

Closing costs: $3k

= $27k

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$3,888/$27000 = 14.4% CoC ROI.

Should I do it?

Jaysen Medhurst · Answer

@Keegan Darby, I like to see $150-200/unit/month and a CoC ROI in the mid-teens or better.

Jaysen Medhurst · Answer

@Keegan Darby, I just commented on one of your other posts, so you know how I feel about Management. That said:

• It's always good to break out taxes and insurance from P&I.
• I use 8% Vacancy when underwriting any MFR property.
• Water and Trash looks low. I don't know what trash is in your area, but I figure $30-40/unit/month for water/sewer. Call the local water authority.
• Also good to include a little each month to cover admin/professional expenses like tax prep and advertising vacant units.

Keegan Darby · Answer

@Jaysen Medhurst Thank you. After taking all this into account, what CoC ROI % are you looking for?

Jonathan R McLaughlin · Answer

#s sound okish, but at that rental price it sounds like a lot of work for the 14%....turnover likely to demand higher rehab and at a certain point repairs stay the same even though the property is cheap. If there is no appreciation you are underwater for a while if you consider closing costs and brokers commission for selling. Roof? Wiring? Windows? Foundation? Smells like you are going to get less than the projected amount and work harder for it than you might like to. I don't know how it stacks up against the competition though.