Dallas/Fort Worth Real Estate Investor Club

Duplex Dilemma

  • 10 Jul 2018 8:11 AM
    Message # 6368632

    I am looking at buying a duplex near me for $375,000, asking price, and its inline with past solds. The only active comp is $369k and 4 have sold in the last year for 2x @ $325k 15 months ago, 1x @ $340k, an 1x @ $359.9k, so her pricing is reasonable & she is selling as is, with no improvements and it most likely will be FSBO. 

    We would live in one side and keep the long term tennant on the other side. She has done a lot of improvements, flooring, cabinets, paint, foundation, etc. one is 3/2 and the other is 4/2. So there should not be much work needed at this time, pending an inspection. I can rent a 3/2 now for $1500 or so, as I am paying $1450 for a similar 1/2 of a duplex and maybe $1650 or $1700 for the 4 bedroom. 

    I am seeing with 5% loan & with my VA of nothing down, its only $2k a month? That would be incredible, and while I would apply for homestead on taxes, I see when i move out taxes are a whopping $9150 a year. Or $762 a month just in taxes!

    So if I look to then rent it out after I move out i would still have the $2k payments & if I bring in $3,100 or so in rents, i only get a paltry $338 in cash flow after taxes and before insurance, which should be in the $75 or so price, so I am left with approx $270 in cash flow, and if it need a big expense within a year, say for a roof, I am not making anything.

    Is this a thumbs up or thumbs down???

  • 10 Jul 2018 1:35 PM
    Reply # 6374643 on 6368632
    Robin Carriger (Administrator)
    I understand that you don't anticipate any vacancy or maintenance in the short run, but wise investors always include something for each of those when considering a purchase.  And... if you're really thorough, you'll add an expense item for property management in your cash flow calculator even if you plan to initially handle the property management yourself.  Rents may continue to go up, but we are way overdue for a market correction.

    So... since it's a thin deal even without the above, I'd have to give this a thumbs down as you've described it.  The following image is a little much, but it's still funny.  :-)

  • 11 Jul 2018 7:44 AM
    Reply # 6375754 on 6368632

    I'm with Robin on this one....

    The cash flow isn't good enough.  Right now houses, duplex, tri-plex, and 4-plex are over priced. DON"T pay retail for houses!!!! You/we need to buy distressed properties, fix them up and then rent them out.  Buying full retail in this market is a sure way to lose money:(  You want to look for properties that have $15,000 or more captured equity in them and make them a rental.  Example; you find a house that has a ARV of $100,000, purchase it for $60,000 put $25,000 in repairs into it, your in it for $85,000 with $15,000 equity.  Your loan payment is @ $750.00ish, Rents for $1,000, cash flows at $250.00 a month:)  Even if the market goes down your loan is under the value of the house so all is good and when the market comes back your in great shape! 

    BUT always remember their are not set rules in real estate and you might find a great rental at full retail off the MLS that cash flows good.....

    *Their are no failures, just out comes we didn't want*

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