1st Deal: 260K Duplex Too conservative?

Question

All numbers annual. House built in 1980. Property is 2.5 hrs away and has long time tenants in place. Rents 1150 newer tenant & 925 longtime tenant, identical units which leads me to be optimistic about raising 925 up over time. Considering self managing to make this baby cash flow. Am I missing anything? Thoughts?

Rental Income = 24900              Cash Flow = 1026

Vacancy at 5% = 1245

PM at 10% =  2490

Property Tax Estimated at 1.25% = 3250

Repairs at 8% = 1992

Cap Ex at 8%= 1992

Insurance = 1048

Mortgage @ 4.5% = 11856

Noel R. · Answer

No utilities that I am aware of. Stock market would net greater returns now but I am looking to start investing in realestate. Area seems decent. Also was thinking there may be an opportunity to split them and sell individual down the road. Saw a half unit sold for 170k within past 6 months. Not sure on costs and ability to split.

Thomas S. · Answer

Not worth the time and effort on what could easily turn into a negative cash flow property. You could easily  do better with passive investments, REIT as a example.

Derek Kirkwood · Answer

Thats only about 2% cash-on-cash return (assuming you are putting 20% down).  You can beat that fairly easy in the stock market.  Unless there is going to be great appreciation then it doesn't seem like a great deal to me.  If you rent both sides for 1150 and self-manage it would be more like 10-11% cash-on-cash return, maybe that fits your criteria better?

Are there any utilities that you have to pay?

Matt K. · Answer

You could do better, well not sure if you could get 2.5 hrs away but you could get a better performing place. Also, don't get caught up on paper returns.... what's the actual area like? If this deal was in a great area, great market etc it could make sense. If it's in the ghetto and section 8.... pass.

Josh Dillingham · Answer

All I can say is this wouldn't fit my criteria. You've done a good job estimating expenses and your percentages are pretty conservative so your not likely to get upside down in this thing. But cash flow of less than $100 per month wouldn't be worth it for me, and when you have to self manage a property in order to take it from a subpar deal to and OK deal that is dangerous territory. I'd say keep looking you can find something better. Looks like you are probably in an expensive area and will have trouble making the numbers look good In your market. If you're willing to go 2.5 hours away why not look a little further and see if you can find something that cash flows at $200 per door per month with property management, that's the number I like to stay above.