Is This A Good Deal On A Duplex...
Hello all,
I am very new to the investing business, so excuse the ignorance.
I have been offered a duples property where the sales price is $189000 and the monthly rent being $1690. Putting 10% down on it gives a positive cash flow of $206 per month. Does that sound good? looking at the forms and postings...
cap = (1690*12)/189000 = roughly 10.7%
grm = 189000/1690 = 111.34
Please advice.
Thanks for the quick response. Ok factoring that the cap comes to 9.6%. You said it is less attractive at 10% down, can you explain? Would be better if I put 20% down? What are the advantages!
Thanks a lot for any insights/tips!
How did you arrive at 9.6%? Did you factor repairs, vacancy, legal fees, advertising, etc.
I would want to see the return on cash invested at 10% (plus I assume closing costs). Let me know how you determined the NET monthly income and we can figure that out.
[addsig]
Hi,
Again thanks for the reply. This project is a new construction and is offered only to investors. This is a duplex unit and the monthly rent is $1690. The asking price is $189,000. You are right I have not taken into account the vacany rate.
Here is how I came to the 9.6% caprate figure:
Total rent = 1690
Management Expense = 8% = 135.20 (This is done by a management company. This includes advertising, they will do credit check, do maintainance, inspection etc).
Lawn maintainance = $40
So the expenses incurred before the mortgage payments = $175.20
Before Mortgage payment = 1514.8
So caprate = 1514.8*12/189000 = 9.6%.
Mortgage payment (including escrow and everything = $1308
Cashflow = 1514.8-1308 = +206.80
What else am I missing in this scenario? Here is the details of what the managemnet company does:
1. Advertise + show property when available for rent.
2. Interview and accept prospective tenants’ applications.
3. Process applications through the Credit Bureau.
4. Accept or reject applications.
5. Negotiate and complete Lease Agreements on accepted applications.
6. Collect tenant deposits and maintain in a Trust Account as required by law. 7. Collect the rent.
8. Represent owner in Small Claims Court when necessary to collect balances due.
9. Take complaints and requests from tenants and make the necessary repairs. 10. Have lawn maintenance done on a regular basis.
11. Make necessary repairs between tenants. Typical repairs would be: Current 2002 pricing: Paint - $225 (Walls Only) (2 Bedroom Unit) Clean Carpet - $75 General Cleaning - $70
12. Send monthly statements and balance due to owners.
13. Make mortgage payment if owner prefers.
14. Inspect exterior of property on a regular basis and interior of property between tenants. Report any major concerns to property owner.
15. Totally represent owner’s interest in all aspects concerning the property.
Thanks again for your time and insights.
What about annual property taxes, insurance and association fees? This will surely cut into that cash flow.