Investment Analysis- Duplex

Hi Prospects & Friends,

 

I wanted to share with you all this duplex I drove by to see a couple of days ago. I'm waiting for the #'s to come down & will try to make an offer. If seller doesn't want to reduce listing price, then I will move on to the next property for my investment portfolio. I currently manage & own 7 investment properties & looking for 5 more to make a total of 12 to complete my investment portfolio, my deadline goal is to have the other 5 investment properties by 2014. I will starting explaining why I want this duplex to come down in price. First here are the #'s & details of the duplex:

Listing Price- $164,500

Contract Rent- $1,590/mth

Taxes- $230/mth

Maint Fee- $85/mth

Proposed Ins- $150/mth

Total Sq.ft. 2,770- Side 1 $795/mth, Side 2- $795/mth

Side 1- 3Br/2Ba- 1,385 sq.ft.

Side 2- 3Br/2Ba- 1,385 sq.ft.

After carefully applying my investment analysis I've come to the conclusion this property can still come down some more in list price to even give me a better opportunity. I will explain see below:

Rents are currently renting for $735/mth not $795 even though the current owner has signed lease contracts stating so. To apply my investment analysis rule to this property see analysis below:

Rents from owners current tenants are paying $795x2=$1,590-$465 (expenses)=$1,125

So $1,125x6.00/1000=$187,500 (6% interest rate)

$1,125x7.34/1000=$153,300 (8% interest rate).

So based on $1,590 rent ($795x2) range is $153,300-$187,500 this range is off because rents are not consumerate with the list price. This is where many people mess up I take it a step further see below:

Contract rents say $1,590, but current market rents say $1,470 ($735x2) so I will re-apply but work with my #'s see below:

Market rent is $1,470-$465=$1,005

So $1,005x6.00/1000=$167,500 (6% interest)

$1,005x7.34/1000=$$=136,900 (8% interest)

See how my range looks $136,900-$167,500? My range is saying I can offer as low as $136,500 or offer no more than $167,500. The current list price is $164,500, so it's falling in my range of $136,500-$167,500, but I like to keep watching people reduce the list price on a property that has great investment #'s like this one, because you can't loose! So fact is I based my range of $136,500-$167,500 on the market rent & not the contract rent to negotiate so I don't over pay, once property is bought it doesn't matter if rent is $1,590, why complain about someone paying you more in rent than market says? My investment analysis range of $136,500-$167,500 says two things:

1. I wont over pay for property currently listed @ $164,500

2. I based range on market rent which is $1,470/2 or $735/unit. So if tenants don't renew I know market rent is $735/unit & not $795/unit & when I list to lease I will always have enough rent to service the expenses @ the $735/unit because I made sure I didn't over pay from beginning to cause the mortgage to be over $1,005/mth.

I use my investment analysis equations on all my investment properties I analyze & if the #'s don't work I walk away & move to the next. Soon I will offer another helpful article about investment properties.