Potential Duplex Deal - My 1st Deal

Looking at the duplex numbers:

$170,000 purchase price
- 8,500 down
________
$161,500 @ 7% for 30yrs = $1074mo (6% would be $968)

$1540 mo/rent
-1074 payment
- 75 insurance
- 145 taxes
______
$ 246 mo profit, if no vacancy, no repairs, etc.

Not TOO bad but might be cutting it a little close. What are the comps in the area? I'm thinking the guys are going to tell you to offer lower than $170K.
Try nstreet's formula, too. http://deangraziosi.com/node/3975

As far as the refrigerators, I like to provide stove & fridge. Seems like the norm. They're not really that expensive nor do they need replacing very often. Now washer & dryer is another thing. You don't want to be responsible for TOO many appliances.

And the real estate agent/investor. They aren't necessarily going to be picking up every good deal, especially if they're making good money at what they do. Part of your team SHOULD include a realtor that has investing experience, so don't be too skeptical.

I don't know if that helps at all, but I didn't want your question to get lost in the forum momentum.

Good luck with your deal and thanks for making your first post.
It's good to have you join in.

Rina

I was just re-reading my answer and I hope I didn't sound discouraging. You know, any deal where you're going to make money is a good deal. And then there are GREAT deals. Maybe this one will get you started. I wouldn't want to hinder your REI growth, so you go with what you are feeling confident in, OK? I would hate to see someone stop because someone else said "That's not a good enough deal."

being a little wishy-washy,

Rina

Hi rina gave you sound advice on the numbers. The fridge is not strange i think he 4s rite.you may not be making a lot on this deal but offer lower and use this as base in Rei portfolio

Brian, what is the vacancy rate in the area? Calculate that in and see if you have a positive cash flow

Best to you,
Bruce

You should also know what the FMV (fair market value) to determine if that's a good deal or not. Accoring to the numbers Rina provided above, it's a good deal given the info provided, but not a great deal. Knowing the FMV in your area helps a great a deal determines whether is a great deal or not. Good luck and happy investing.

Lloyd

First, I just want to say thank you to Rina, Bruce, Lloyd and Anita for giving me such quick and helpful responses to my first post. I'm a bit verbose and after I sent it, I was afraid no one would read it b/c it was so damn long! But, not only did you read it, but you analyzed it and broke it down to me. As a newbie who is still lookin' to pull the trigger on his first deal, I can't express enough gratitude. BTW, Rina, you weren't "discouraging" so no worries! BUT, now that I know you're out there, I want more!...

First, as far as FMV, do I just go by comps? I went on to county tax website and no really recent sales on block to gauge value plus I don't really trust the site. Second, another reason it was attractive to me was that the owner apparantley has 10 properties in the area that he's looking to unload when he moves (I don't know why but he's only putting 2 on the market at a time w/ this realtor I met yesterday)...I thought that if I show him serious interest in the first, I could maybe get a good deal packaging a few future properties together and this guy could be like a mentor to me and really help me establish a nice portfolio. Anita, if you're the Anita that was on the conference call in May, he could be like the guy that you met!

He does not provide washer/dryer but there is a basement where one tenant has a washer/dryer and both tenants can access it so long as the owner of it permits the other to use it. Finally, there are two parking spaces off an easement with a 2 car garage, one for each tenant. Overall, it's a decent spot and he has put in new carpets and new paint job after each tenant moves out so it's in good shape.

I should mention that I will probably want a property manager only b/c my wife and I work full-time and have 2 young children and don't want to be hasteled by a late-night call about a broken sink, etc. I know it'll cut into cashflow but I really want to get my feet wet and build some equity.

Here I go talking away again but one final note: Rina and Anita, you 2 r amazing...I see you in every forum posting on every blog and responding to everyone!!...It's so great. I feel like you are dg "plants" sent in to build all us ignorant folk's confidence and help us realize our dreams. Either way, you really are great and I think you should know how much others appreciate the time you take to help others that you don't even know.

Ok, I'll keep you posted on whether I go for it...I will certainly try to offer less if I do make an offer. Thanks again.

Brian

You are very welcome (I'm sure I speak for everyone!), and I laughed so hard about the "plant" thing. That just goes to show how addicted some of us are to the site! If you check out when each of us first joined (under our names and in our bios), that LITERALLY is the first time I ever saw deangraziosi.com. As for me, I think that was actually the first week I even HEARD of Dean, or at least his book arrived in my mailbox (rush delivery from ordering off his infomercial). I really think it was "meant to be". I know even folks in Dean's circle have said the site is more than they expected. And it's ONLY because of everyone who posts. Weird. Nobody here is paid or compensated or anything, but I think it is one of THE greatest websites there is. (I'm a little bias of course.)
Anyway, if you tracked our posts and those of others, you would see just how much a person can grow here. So watch out, Brian, now that you spoke up, you're in for it! lol
Thank you for the encouragement and God bless.

Rina

A couple of thoughts. If you are putting 5% down, there will presumably be PMI involved. That will knock the positive cash flow down. THis is basically a break ven deal. If you aren't buying under market, it doesnt seem like a deal.

Duplexes and triplexes are sort of odd birds. They are somewhere between SFRs and multis. Normally, they are priced like houses ie you use comparable sales rather than income to value them.

I have never been a big fan of them because they don't appreciate as well or rent as easily as SFRs yet they don't cash flow like 4+ units either.

Wmark,

I appreciate your input...Forgot about PMI. It seems there's always some expense that you forget which is why I assume everyone above has said it's potentially a "good" deal but not a "great" deal. You need more of a cushion for those unanticipated expenses. My father has some SFR investment properties and he told me he's not a fan of duplexes just b/c you have twice the potential for problems w/ appliances, etc. I guess what you're saying is that until you get up to 4+ units, the cons outweigh the pros b/c a 4+ is more like a condo essentially? Do I have it right? Thanks again for your input. I still may look into it if I can get him down significantly but we'll see.

Brian

A couple of points.. at 4, you can still get residential financing. So 4-plexes are ok. You can get pretty good cash flow with 4-plexes.

Yes, you can have 4x the problems with a 4-plex but you also have 4x the income. And the price is NOT 4x a SFR- or at least it BETTER not be.

Above 4, you get into commerical financing but seller financing is also more common. And of course, you get into economies of scale since you just have more units.

i have been trying to find answers to my first deal`s problems.
i bought a duplex not great but in decent shape has 2 section 8 renters in it,the owner is going for bankruptcy ,and has a foreclosure looming also. there is water in the basement ,due to a broken or non-plugged in sump pump. my dilemna is, title company told me to wait 2 months for the bankruptcy and foreclosure to clearup,to get clear title. but in the two months ,with water collecting,i`m worried the heat, and hot water units will be ruined. as well as all the water attracting termites etc. and possibly the tenants being evicted. i want them there,they are my income ,have been there awhile and are a captive audience and income. any suggestions ?

thanks,
so1970/joe

Hmmm. you're right. Does sound complicated.
Can you work on the building before the title has cleared? If the fix is not too costly it seems like the route to go.
Are they advising you to wait so that it won't cost you extra in the Bankruptcy/Forelosure mess? Do you already own the building, or are you in the process of purchasing? Is there someone that is stalling for their own benefit?

Just think things through. If it's a great deal, you can find a way to make it work.

Rina

You might want to look for something else for these tenants if you really want them, helping THEM might just be the answer.

I know just how you feel!! This site is almost too good to be true - BUT IT IS! You can come here, make a post, or just read through all the forums already posted and find a wealth of support and information at your fingertips! Everyone is so awesome and helpful. A word of caution - I was where you are a short time ago...I wanted to get started so bad I almost bought a few houses that were definitely NOT good deals, no matter how much I wanted them to be. Use the formula that was mentioned above by Rina and remember THE NUMBERS DONT LIE! Do your homework well on comps, FMV, etc...and trust me - that perfect deal will come along! 3 months after getting my book and finding this site I closed on my first house....and now only one month later I'm putting it back on the market after rehab! I wish you the best of luck...keep us posted!!!
Laura

I appreciate your kind words and inspiration. I'm gonna keep working at it until I find that "perfect" first deal and then I'll pounce. It's just tough in the beginning b/c you so badly want to get that first one under your belt...but, I know I have to be patient and wait for the right property.

I'll certainly keep you posted. Thanks again.

Brian

The good thing is there's a ton of them out there! You'll find them, be patient and have faith.