All Forum Posts by: Brett Hayes

Hi All-

Seeing a property this weekend, and have my initial numbers run out - looking for input or analysis, or what I'm missing:

-duplex, declining rural area, 30 min to growing mid sized city of 50k but only 2k residents in the town

-current owners renovated both units in 2013 with new roof, hot water heaters, electric panel boxes, all new windows & exterior doors.  nothing needs to be done assuming inspection comes back clean on foundation & major items.

Potential income: 18,600

Vacancy: (1,550) one month

Gross rental income: 17,050

Expenses:

Real estate tax: 2,350

Landlord insurance: 1,300

Repairs & Maintenance: 3,350

Utilities (water & sewer): 1,000

Lawn: 400

Maintenance man: 400 ($20 per hour, ~20 hours per year)

Total expenses: 8,800

Net Operating Income: 8,250

Debt Service: (3,313)

Cash Flow: $4,937

Tenants handle all utilities other than the water & sewer and lawn.

One thing I could be underestimating is the handyman costs - I will be 'self managing' from out of town, but this man (I know him and trust) has agreed to handle any minor items as well as move in/outs, key exchanges, etc.

Only potential weak point to me appears to be the market - definitely unlikely to be a growing market, but close enough to growing city to at least maintain?  Another issue is that the schools in the area may be forced to consolidate in the next decade or so, resulting in more of the population base/support leaving the town.

Thoughts on this deal, and/or on investing in declining rural areas in general?  Wondering if the proximity to the mid tier city helps any, or if this is too risky.  The returns look great on paper.

Thanks for getting back.  Property is in a rural area, so not many investors in the game there, but also agreed on it being strange to still be on the market.

Good point - I think those initial repairs would have to go into the initial investment, not budgeted for capex.  I will say though that the building is currently occupied and producing those numbers for rent today, so nothing *needs* to be done upon purchase but should be done right away to avoid hassle down the road I think?

Garbage is handled by tenants, on a private well so no water fees.

Your points about the initial investment do make sense though, I think I was not accounting for the closing and initial investment on repairs costs, which would drive the cash return down quite a bit.  No longer seems like a can't miss - thanks for talking sense to me!

Longtime lurker - finally thinking it may be time to pull the trigger.

Looking at getting a quadplex built in 1910 in a rural area with little to no appreciation potential.  Very high renters population and several stable employers so not overly worried about population loss in the next 5-10 years.

For sale for almost a year, the owner passed and his son lives out of state and wants nothing to do with it.  Listed 105k.

Rental income: 37,200

Vacancy: (4,650) 1.5months average

Real Estate Tax: (3,300) Appraised higher than planning to offer.

Property Insurance: (1,400) Not sure how accurate this is - this is just guesswork from online searching...

Repairs & Capex: (7,440) Using 20% since old house

Utilities: (6,300) Heating gas paid for by owner

Lawn/Snow: (600) Currently gives $50 a month off rent to one tenant

Handyman: (720) I'm 2 hours from the property - have a guy I trust who lives there I'll pay $30 an hour to for handling minor items.

Expense: 19,760

NOI: 12,790

I am thinking since it's an inherited owner, in an area with little appreciation and other investors, to offer in the neighborhood of 80?  That'd give me (3,954) in mortgage payments for cash flow of 8,836 - 736 monthly or 184 per unit.

Feels good from a high level, but this old of a home I expect extreme capex costs in the next handful of years (no replacements to roof or furnace).  Any questions I need to ask or additional things I should consider?  Thank you!