Property background: Duplex 2+1; Buy and hold 4% interest rate, 25% down : Offer price- $155k; Type C working class neighborhood, appreciation since June 2019 till now 16-22%, likely market inflated prices due to low inventory and rates. I don't expect much appreciation, the community has been stable for last 15-20 years . Rental on 2 bedrooms is $1000-1300/month.
These are conservative numbers, I calculated cap rate of 8-10% which is decent in the area. Let me know if these numbers look good and makes sense, will you pull the trigger?
This is a duplex, right? LL does not pay water/sewer?
@Darius Ogloza separate water; sewer will be paid by LL. thanks for pointing it out
Unexpected/hidden utility costs can kill the value of a multi pretty quickly. Assuming a reasonable rate for sewer, it looks to me like you have a pretty nice deal here.
@Darius Ogloza thank you.
I know it's not the best deal but market has been crazy and had to bid over the asking price for many.
Still staying patient and disciplined and follow my criteria.
I think that this is a decent deal. Numbers are conservative, I think you will have less vagancy, less insurance cost, less repair. But maybe taxes are higher and maybe insurance ? I would double check on those.
But other than this I would pull the trigger. Do you have the inspection report yet ? If the inspection is kinda ok, than I would say go for it.
@Michael Thach thank you!
No inspection report yet, the home seem to be in good condition. Hoping nothing major comes up.
Get a inspection. No matter how good it looks. Inspector will always find something. Use the inspection report to negotiate with the seller.
Usually you try to get into the contract first. If its a good deal and you have to fight for it, you can give them a higher offer to get into contract after you are in the contract and you got the inspection report use it to negotiate the price down.
If the market is slow negotiate a price so low that you can get into the deal than use the inspection report to push it lower.
For me a big part of fun in real estate is at negotiating
@Michael Thach Thanks for the information. I will be sure to get home inspection.
@Rahul R. I see that you will have an inspection done. However, based on initial assessment do you expect to have any upfront rehab costs (I saw a line item in your spreadsheet, but no data)? Is it currently rented? If so, what are current rents it's receiving?
@Frank Klarich it was an owner occupant duplex, not currently rented. I'm expecting cosmetic fixes- paint, kitchen floor, no major rehabs. The house seem to be well maintained over the years.