Well, I decided to take a look at the property in the area that I alluded to in my original post regarding registered sex offenders. This will be a lengthy post; I apologize in advance. I'm hoping to cover three issues in this post and will try to categorize each separately: deal analysis, Section 8, and my realtor (possibly getting a new one).
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DEAL ANALYSIS
Duplex - 2 BR/ 2 BA units. Built 1999. Each unit about 600 sq ft. Each unit also has partially finished basement (dry wall is up, needs paint, etc.), offering a huge amount of storage space. Also thinking might be able to add an additional BR here (one of the rooms in basement has window and area with door that could be a closet (although it has pipes running through it, so hopefully no leaks!).
Purchase Price (ideally): $46,000
INCOME: $1,000/mo ($500/unit)
EXPENSES
Vacancy Loss (@8% or 1mo/yr): $80/mo
Cap-Ex (@10%): $100/mo
Prop Mgmt (@10%): $100/mo
Ongoing Repairs (@10%): $100/mo
Prop Taxes: $60/mo
Insurance (guesstimate, will get quote soon): $75/mo
TOTAL EXPENSES: $515
FINANCING: 20% down, 30 year fixed, 4.70% interest rate.
Principal & Interest: $190/mo
INCOME - EXPENSES - FINANCING = MONTHLY CASHFLOW = $295/mo. Might be slightly off due to rounding.
REHAB/REPAIR COSTS (to get rent-ready)
These numbers can be wildly off. I have no clue how much stuff costs and am by no means a rehabber or anything close. Both units need work; here are the larger items:
Appliances (Unit A needs range + fridge; Unit B needs fridge): $1,500
Floors (flooring needed in living area, hallway, bedrooms - probably use vinyl): $3,000
Windows (need to be re-sealed) + New Doors (front screen door, doors in basement to yard, etc.): $1,500
Paint (most rooms need paint): $1,000
Roof Shingles: (may or may not need to do; roof missing a few shingles near gutter): $300
Dryer Duct (missing a piece that connects from laundry room to outside, quick fix): $100
Hot Water Heaters (electric) x 2: $2,000 (which is probably way high, but trying to be conservative).
TOTAL ESTIMATED REHAB BUDGET (which is probably sky-high): $9,400
ESTIMATED CLOSING COSTS: $5,000 all-in
PROJECTED CASH-ON-CASH RETURNS: 14.91%
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SECTION 8 PROGRAM
I really need to educate myself on the Section 8 program. This area appears to be mostly Section 8. I think I would have difficulty getting a non-Section 8 tenant in place after I fix the place up due to the area. The general location is great. It's right off a major highway, there are big stores like Wal-Mart, Lowe's, Kroger, etc., within 1.5 miles of it. There are a couple of factories nearby - very blue collar. I'm told just around the corner there is quite a bit of drug activity and police are often on patrol in the area. Believe it or not I felt pretty safe there (much more so than in other areas I've looked at). Plenty of kids and families living nearby, too. Neighbors have lawn chairs, swings, and all kinds of **** all over their front lawns and back yards/porches, which you might expect in a low-income area.
My Section 8 Question: How do I find out how much the vouchers are paying in the area? Is this public information? Also, will it differ for different tenants? I've read the many arguments on BP about accepting Section 8 vs. not, but I feel like if I make an offer and purchase this property, accepting Section 8 may be my only option.
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My Realtor (possibly firing him)
Lately, I've been feeling extremely frustrated with my realtor. On a previous post in the Deal Analysis section, one BP member suggested I fire him for talking back to me (I think he was giving me some push back regarding my offer on another property).
The last house he "showed" me, he arrived on time and we did walk-through, but then all of a sudden he needed to go and asked if I would just shut the door behind me on the way out and make sure it locks. I will admit that I'm very thorough and like to make lists of things I'll need to fix, record a video so that I can look back and remember things later (as I've been looking at more and more properties lately), etc. I was a little shocked he just "left me there."
This duplex that I mentioned in this post is another example. He had some personal things going on and essentially gave me two options: go myself and he'd give me the code to enter, or he could ask another agent to show it to me. I wasn't comfortable with the first option, so he had someone else meet me there. The funny thing is that I really liked this other agent a lot. Not only did he show up on time, with paperwork prepared with information on the property, pointing out both good AND BAD aspects of the property, he was educated on the area and shared his knowledge, he was extremely personable and was able to carry on a conversation with my significant other while I went in and took my usual videos/made my lists/etc. At no point did I feel hurried or rushed. He will receive a referral fee if I buy the place, but I'm not so sure "my" realtor earned his keep on this one. My realtor was too busy to show the place to me because he was selling some personal belongings, including an automobile. He had the audacity, while the other agent was showing me the property, to text me and tell me that, "he made the right choice" because he sold his vehicle. I can understand being excited about selling a vehicle, but to text your client and basically tell them that and basically imply that you, the client, are much less important than the vehicle sale is just rude. THEN, he calls me to see how it went and ASKED ME what THE OTHER AGENT said about rents in the area! Isn't that YOUR job to know that information?! The worst part is that he rushes me off the phone right when I start to get excited and tell him more about the condition of the property, and I'm almost positive he said that he had to go because he was showing a property in town and he just arrived. I could have heard incorrectly, but I'm about 85% sure this is what he said.
My significant other thinks I should absolutely work with the agent that showed us this property and to get rid of my guy. In his defense, he has taken a lot of his time to show me other places over the past couple of months, even on weekends and properties that are geographically far apart (45 mins+), but lately I just feel like he doesn't even want to deal with me. It's very frustrating. I've called him out on it before and he basically just tells me that he's willing to show me whatever I want to see, but that he thinks my expectations might be a bit unreasonable sometimes in terms of rates of return, repairs/reserves, etc.
The twist: the agent that showed us this property is (mildly) considering going to work for this other guy. I don't want to jeopardize his job prospects if he chooses to make a change. The other twist: my current realtor is also with a property management company that I am planning to use (although, if it's this much trouble to show me a property, what happens when my tenant calls them for something urgent? how quickly will they respond?).
Sorry for the rant, but thoughts are much appreciated. I'm trying to figure out if I should give my current guy the sale as though I owe him something (and to somehow account for all the times he was good about showing me properties in the beginning), or if I should say it's all about what he's done for me lately (nothing much) and dump him and move on to the new guy.
