? for those of you who own rental housing
 

I may bid on a duplex that will cost about $215000

if I put $43000 down....that leaves a loan of $172000...and at 6.5% thats about $1090 a month.....taxes are $300 a month...

Rents = $1600 a month....

Leaving about $200 extra per month for insurance and lawn work/water bill....

Worth it???

XPorn

youre gonna put this up for rental? defenitely no then

2 renters already live there.....so yes...its rented....

make sure you find out how long the renters have been there, if it vacates often then not a good diea.

I do larger properties but we get 10% cash on cash return. You have no figure for vacancy -5%. You have nothing for reserves. Property management? But if you hold it long enough you will make cash.

YARGH! It does seem good. Just make sure you set money aside for when it's not rented.

It's kinda silly to invest in a property that leaves such little margin for error. I mean if all you're hoping on is appreciation over time, it's a lot riskier than many properties out there. Not worth it look around there may be better, just take your time you'll find a few jewels.

If you can afford to make the payments if it goes unrented or the tennants don't pay it may be worth it depending on expected appreciation. However, saying that, I think RE is going to be in the dumper for a few years very soon which may leave you looking at a loss. I also think the rent is cheap at $1600 for a $215,000 home. $1950 - $2150/mo. would be better and make the $$ look workable.

If you're looking for a long term investment that basically pays for itself then it's worth taking a look at. But you have to be sure you can afford the payments if suddenly it goes unrented for a few months or if interest rates shoot up and your mortgage payment increases and the rental market doesn't justify a corresponding rent increase...

Much depends on the current condition of the duplex and the real estate market in that neighborhood. If it's in excellent condition and requires no repair, maybe. You've not left yourself a whole lot of room for improvements or disaster with this investment property.

Red Bull For Everyone.
Brad

minimal profit margin. I'd say look into older buldings with more units in them.

The only time I think that buying a duplex is worth it is if you plan to live in one of the units.

$200 is a bit lean of a margin if you ask me... Are the rents low? Can they be raised?

DH

yes...the renters have been there 5 and 3 years......each pay $795.....no rent increase in at least 3 yrs. Can probably bump to $825-845 to actually remain slightly below market average.....

exactly, $200 is nothing, look around, this is a very low profit deal, id skip

You are not accounting for serveral factors...

How old is the duplex... more importanly, how old is the roof, ac/heating, does the plumbing work properly, etc..

If it were a brand new house then you can figure as you mentioned couple hundred extra for upkeep. BUt i am assuming it is not a new house. New roof could cost you 2K - 5K depending on what type of house and how big. So if you need a new roof in 5 years you should be putting a portion of the rent money aside for that. Then there is always the unexpected problems, it happens.

Also you shouldn;t have to pay water, there should be two water mains to the duplex, but if you have to pay it then you better factor in worse case senerio and a family of 8 moves in and takes lots of showers and washes cloths and leaves the damn hose on all the time or your old damn bathtub drips and your toilet runs. 1 of the 2 sides could cost you more then $200 in water. I don't pay any utilities too risky.

The other thing you need to factor in is vacancy. You have to figure at the very least a couple months a year vacancy, 10% is a fair amount. Even if it is strong rental area, you will still have some people move out in july and next people cant move in till sept1.

If you decide to do it then you better make sure you can pay the note with out any income for several months. You WILL get people who will pay late and in some cases they will not pay and you will need to evict them.

Iwould get a quote on insurance too so you know exactly how much it is.

Sounds like an older building to me.

What shape is it in?

What repairs does it need?

How old are your renters and will they move if you raise the rent?

What's going on in the neighbourhood? Real estate wise?

I don't think you've provided enough information and details.....for me to give an informed opinion; but, on the face of it, it doesn't sound great.

If you figure in insurance, cost of mowing the lawn, water, vacancy, and minor repairs you will be left without any profit. Doesn't sound like a great deal to me.

yes, i think so

Depends on the area, if its in the middle of a hot market that shouldnt be a problem at $1600.00 to rent out or even to live in (if you got the money).

Jim

yes...pretty hot market....so not like in middle of no where......
Both units already rented with those longer term people.....

Only killer is the fact lenders kill ya on teh rates with rental properties....
6.5% with 1 point
or
5.75 with 2 points...

Sorta seems logical to do 2 points....after 2 or so years....that seems to pay off...

XPorn

Kill ya? I guess you weren't around when interest rates were up to 18%. They're currently very low now what are you talking about?

Also points aren't usually a good idea unless you plan to hold the place for 7+ years, which is the average age a property is owned before it changes hands. Keep the points money to yourself and let the tenants pay the (very little) extra per month. Usually in a few years either 1. you plan to sell 2. you refinance to take advantage of a better loan or 3. you'll hold on to into it for longer. That $3600 or so in pts you'd pay would be better in a reserve.

As for the deal itself, it's not much imho. It doesn't have good (if any) cash flow and won't appreciate as good as a SFH. If you want appreciation/speculation, go for SFH with little/no cash flow. If you want cash flow, go for a 4-unit building - they're usually not much more than for a 2-unit building and the income is twice as good.

depends on if it needs any work. just because someone lives there doesnt mean it doesnt need work. if it doesnt and you can afford to make payments if someone vacates then probably do it.

what part of michigan you from? if you need help looking up any info on it i have access to the multi listing.