Help with decision!!

[REI_Chris]

Hello everyone!

I haven't been on here for quite some time, but I have been lurking and doing my research. I bought Mike's book awhile ago and am ready to pull the training wheels off the bike.

I have a chance to buy a duplex in a relatively good area for 65-70k. Here are the specs on the place:

-each side rents for 550 (one side is renting for 600 with a 50 dollar pet premium each month)
-property tax is 1.8%
-all utilities are paid for by tenants
-newer 80% efficient gas furnaces
-roof has 5 years left, which I will assume has 1 year left 
-Newer electrical throughout
-no major problems with the place since I know one of the tennants personally and have somewhat of a great idea of what the place is (been in and out of the one side many times and understand what I'm working with)

I really see no major hiccups with this deal, but I thought I'd run it by the pros first. What would you guys suggest? The place has parking for two vehicles each side, a somewhat ok backyard, but nothing huge that will be too much to take care of, and it's on a bus route as well and not in any gang/ ghetto areas of town.

I feel this would be a great start if I can buy this place for 65k. He said he'd work with me on the price if I am really interested (he offered 70-75k on the phone).

Any suggestions? Thanks

[ShortSaleArtisan]

What are your total income - total expenses?

Who pays utilities (tenants or you?)

How reliable are the tenants, are they likely to stay?

For $70k plus taxes with some money down you are talking about $1k per month roughly for insurance, taxes, and mortgage (depending on where you live, right?) so it sounds like it's cash positive, but add in repair costs, etc., and it might be closer to B/E. Are you putting anything down on it?

[redhawk]

I have one just as you described for 62500. Both sides rent for 500/mo with one side 550/mo with pet . I have had this for 5 yrs now. I have not made any money on appreciation or cash flow in all of that time. Here is how it figures out.

rental income@ 1050/mo

10% vacancy&loss 105/mo
maintainence          200/mo
management          105/mo
adv&legal                 75/mo
payment on loan    615/mo
including tax and ins.

total expense= 1100/mo.


I was forced to manage this myself for 55/mo. does that sound like a great deal. If so I have 2 of them that i will sell you.
Fortunately mine did not need a new roof ot the 200/mo expense for maint. would have been higher.
To make a deal like this work now you need more income ,rents in the 700 category. Learn from my mistake, if it does not cash flow well then it should belong to someone else.
By the way both have been up for sale for two yrs for what I paid for
 them.
redhawk

[REI_Chris]

Thanks guys for the insight.

The tenants pay for utilities, and both sides have had no vacancies in the past 1.5 years. The one side has had tenants for 3+ years, and the other side just got tenants 1.5 years ago due to the landlord taking his time to renovate. I know the tenants on one side (the 3+ year tenants) and they tell me the place is very maintenance free and rarely have to call the landlord for repairs. Each side has newer gas furnaces and the wiring has been re-done within the past 10 years. Here are my numbers:

20 year mortgage w/ 11k down
65,000 principal
54,000 loan amount
5.5% int rate
370 mortgage payment each month
1200 gross income (1250 with the pet premium on the one side)-600 one side, 650 the other side with pet premium
taxes-1.8% (tax assessed value unknown since it will be reassessed more than likely, but it's in the range of 1100-1200 a year
not sure on an insurance quote yet, but I have priced in a higher insurance rate just to be safe

the place seems to cashflow well, and I will handle the maintenance as much as I can. I am a younger investor that likes to be involved in everything that I possibly can be as far as repairs go. The place isn't in a terrible neighborhood, and it is on a busline and close to stores, etc. 

[ReCoachDennis]

hey redhawk,

Does the owner have rent rolls for the rent that is being paid?
How does your equity position look in relation to what other duplexes in the area are going for?

Why is the seller selling the property?

He may be willing to owner finance some or most of the deal if he can get a little cash flow each month.

Dennis

[redhawk]

Coach
You did not read my post. Those are my properties. Yes I will owner finance them if you want them.
redhawk

[REI_Chris]

Where are the properties located Red?

[redhawk]

The properties are located in southwest lower Michigan
PM for addresses.
thanks
redhawk

[christopher w]

I just sent you a PM. I have family in lower southwest Michigan (Monroe County) that may be interested.