Gut check
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Gut check (by Bonanza [NC]) Mar 13, 2023 7:36 PM
       Gut check (by Ned [AL]) Mar 13, 2023 8:08 PM
       Gut check (by Robert,OntarioCanada [ON]) Mar 13, 2023 9:14 PM
       Gut check (by Dave [MO]) Mar 13, 2023 9:56 PM
       Gut check (by Rick [IN]) Mar 14, 2023 3:54 AM
       Gut check (by Bonanza [NC]) Mar 14, 2023 6:25 AM
       Gut check (by zero [IN]) Mar 14, 2023 8:46 AM
       Gut check (by S i d [MO]) Mar 14, 2023 8:56 AM


Gut check (by Bonanza [NC]) Posted on: Mar 13, 2023 7:36 PM
Message:

Would you do it? 3 duplexes for $475,000

Monthly rent $3400 (average rent $566 across the 6 units), Yearly rent $40,800

All 2 bed / 1 bath. All month to month except 1 with 4 year lease at $550. New roofs, mostly updated on the inside. Older HVACs.

Market rent could be as high as $800 a month per unit.

Loan would have to be 75% at 8% so about $2400 a month

The problem I’ve been having is there are not any SFH that I can make cash flow. I am fairly confident I can make this work. I guess I am looking for wisdom since going into more debt at this point is a bit scary.

--71.69.xx.xx




Gut check (by Ned [AL]) Posted on: Mar 13, 2023 8:08 PM
Message:

Yes.

But only if I really believed the market rent could be close to that $800 instead of the $566 average. That's a pretty big spread. --70.92.xx.xx




Gut check (by Robert,OntarioCanada [ON]) Posted on: Mar 13, 2023 9:14 PM
Message:

If the HVAC equipment is old then will soon have to replace where if older then ten years spare parts maybe a problem as well. Things can change in six months as no one knows what is going to happen in Ukraine which has a great effect in the world economy. If can break even at lower rent then will build equity. Like everything else it is double edge sword which can go both ways. What are the vacancy rates along with are large industries that can close down. --68.69.xxx.xxx




Gut check (by Dave [MO]) Posted on: Mar 13, 2023 9:56 PM
Message:

Add the current gross rent and subtract the taxes, insurance, maintenance, vacancy 5% and property management 10% which will give you the net rent.

Take the net income and divide net back into purchase price and you will get a CAP rate. A true return on your investment.

You can play with the gross rent numbers of $800 per unit to see the what if it rented for this amount….

--199.200.xx.xx




Gut check (by Rick [IN]) Posted on: Mar 14, 2023 3:54 AM
Message:

Are the current tenants good tenants? If yes, do they intend to stay? Are all the units currently rented? --75.107.xxx.xxx




Gut check (by Bonanza [NC]) Posted on: Mar 14, 2023 6:25 AM
Message:

Darn it. The seller went with a different offer.

Doesn't matter now. I am sad --71.69.xx.xx




Gut check (by zero [IN]) Posted on: Mar 14, 2023 8:46 AM
Message:

Well it was a suck deal anyhow. You would have lost not only money but sleep and possibly sanity just trying to stay above water with them. You dodged a bullet for sure.

This is what I tell myself when a decent deal falls thru.

None of it is true, but makes you not so sad. --107.147.xx.xxx




Gut check (by S i d [MO]) Posted on: Mar 14, 2023 8:56 AM
Message:

Don't be too sad... penciling out those numbers, I didn't see a great ROI.

As it stood, this one barely hit the 1% rule AFTER rents increased to $800, and as you noted that would be impossible for the 4-year leased unit, and would likely require moving at least several of the current tenants out who can't afford the big increase.

Curious what your numbers looked like. I am seeing them barely cash-flow positive AFTER rents got up to $800.

Gross rents ($800 * 6 units * 12 months) = $57,600

Expenses (35%) = $20,160

Vacancy (5%) = $2,880

NOI = $34,640

Debt service = $2,400 * 12 month = $28,800

Cash Flow: $5,840

ROI = $5,840 / $118,750 (down payment) = 4.9%

Bank CDs are almost paying that good now. $5,840 would only cover one minor renovation on a single unit at turn over, so this one would have COST you money for a couple years at least.

Unless my expenses figure of 35% are way too high (I'm basing on industry average), I think that building was an alligator.

--184.4.xx.xxx





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