First Duplex numbers check
Hey everyone! Just had a counter offer on my first duplex. Do my #s make sense? Two 1/1s in AZ.
134k purchase with 4k closing to me.
25% (32500) down payment
Current rents are 800 and 650. Utilities included (🤮, I know) average $350. They are at least 100 below market rents. The 650 side needs some love in the form of carpet, paint, some cabinet doors and a few other cosmetics and is on a month to month lease, the 800 side is good and just signed a 1 year lease. I used about 17% total rents for capex (5% vacancy, 5% mx, 5 and some change for other) which is about 50% total income after PITI and utilities.
1450-570(PITI)-350(utilities)=530
530-250(capex)=280mo 3360yr /32.5k=10.3%
Raise each side $100
1650-570-350-250=480 480mo 5760yr/ 32.5k 17.7%
Add 3k reno = 16.2% return CoC
Am I missing something? I know it's not a home run but I dont want to play the analysis paralysis game anymore and would like to get some good education rolling.
Thanks for your time!
Most Popular Reply
@Joshua Woods With your new numbers I’d do this deal all day long. In fact it’s close to the duplex I’m house hacking right now. I’ve invested closer to $25,000 into my reno but my closing price was $113,000. My side is a 3/3 and my tenant’s is a 3/1. He pays $850 which is under market value but he’s the perfect tenant and moved with me from another location when this property was ready. I will continue to raise his rent to be competitive as his lease renews.
I think this is a great investment for you!
Can you split utilities and pass them back to the tenants? That will make a big impact on your cash flow and CoC.
@Ryan Howell
The unit isn't metered for both. The rents do account for the utilities, but are under market value. Minus utilities, units are renting for 625 and 475, and should be at 7 and 6 with no updates, and 700 and 700 with updates.
Its not a bad deal as it stands, but its definitely worth investigating and quoting a plumber and electrician to see how much to separate.
I would typically include your closing costs into your CoC calculation, unless you are rolling that into the loan. Using your 4K closing costs that would have your CoC numbers at 9.2% and 14.6%.
Is there an opportunity to not put 25% down? That is a lot and sounds like you could be tied up for a while? Why not find something to BRRRR and get that cash on cash closer to 30% - inf?
@Joshua Woods
You know in your heart the deal sucks and that is why you are justifying it ,admitting it’s no Homerun , keep looking bro this one is marginal
@Dennis Wayne could you explain why you think this deal sucks? 16.2% CoC return seems good to me, doesn't Brandon do deals based on 12%? This doesn't even account for future appreciation.
@Ryan Howell absolutely. Definitely looking into that.
@Jacob Simpson thanks Jacob, good point that I did not account for. So I changed the offer to apply seller credit to closing costs, which they accepted and brings my CC down to about $1300.
@Dan Beaulieu I agree and was kinda sad I can't do 20% (apparently a Fannie and Freddie rule). That is my goal soon, I'm just now education myself on hard money/private money lenders so I can BRRRR. I really wanted to move on something as it seems I've been in analysis paralysis for about a year now.
Also, I re-ran the numbers with a 10k reno and total rents received (after paying utilities) at $800 (which I've had a realtor, lender, and local inspector/contractor confirm are market rents for the area with the upgrades) and I came up with a 22% CoC return.
That’s too much cash to tie up from the get go, unless you are buying at a big discount and can cash out refi in 6 months.
I’d skip it until you are comfortable with Brrrr. Otherwise how long will it be before you will be able to buy more?
A few hundred in cash flow won’t make you wealthy, but big equity gains through buying right and renovating certainly will. Cash flow is just there to make sure you’re safe in the deal.
Just my two cents...starting out I also tied up way too much cash and immediately got stuck.
Dan,
Thanks for your response regarding BRRRR. I looked into it and made it happen. Got the price down to 120k cash also. ARV should be around 160k. With 15k reno I should only have 15k tied up and have ~$5400 a year cash flow for ~33% return, conservatively.
Thanks for the rudder steer!
#2 Market Trends & Data Contributor
Dude with this deal in AZ, it's good deal. If you don't like it please sell it to me :)
@Joshua Woods With your new numbers I’d do this deal all day long. In fact it’s close to the duplex I’m house hacking right now. I’ve invested closer to $25,000 into my reno but my closing price was $113,000. My side is a 3/3 and my tenant’s is a 3/1. He pays $850 which is under market value but he’s the perfect tenant and moved with me from another location when this property was ready. I will continue to raise his rent to be competitive as his lease renews.
I think this is a great investment for you!
Where are you located Alicia? Thanks!
I’m in Northern New Hampshire about 40 miles from Canada. My town had about 2800 residents in the summer and 1800 in the winter and most of the investors have turned their properties into AirBnBs so anything here I can buy will find tenants quickly. I’m looking to surrounding towns now.
**Update**
Just got the appraisal back yall... 226k! I'm all in for only 134k and am getting 154k back AFTER closing costs AND I have a few grand in the bank from mortgage free rents. So that means free duplex plus ~25K payday! On top of all of that, it's top of the line so it's renting for $1025 a side! So will cash flow ~10K a year(7K if you take out the 3k/$250 a month for MX/vacancy/CAPEX).
Super big shout out to all of you who helped along the way! I love BP. Serious game changer, I owe you a beer next time your in Yuma! (Dont come in the summer haha)
That is AWESOME! Congrats!