Comments on: Cashflow and the duplex next door http://www.iboughtaduplex.com/buying-a-duplex/cashflow-and-the-duplex-next-door.php "Are you sure you can handle managing something like that?" Well, there's one sure way to find out... Sat, 28 Jan 2012 23:22:11 -0600 http://wordpress.org/?v=2.8.4 hourly 1 By: Christopher http://www.iboughtaduplex.com/buying-a-duplex/cashflow-and-the-duplex-next-door.php/comment-page-1#comment-89661 Christopher Thu, 06 May 2010 08:11:51 +0000 http://www.iboughtaduplex.com/buying-a-duplex/cashflow-and-the-duplex-next-door.php#comment-89661 While the idea may seem tempting, after it is right next door to your property, I figured I would throw this question out to you. What about venturing out into other kinds of investments? You seem to enjoy being a landlady, but has it become somewhat of a hobby for you? Its always smart to diversify your investments -- take a look at the amount of people who bought multiple properties during the boom and are now paying the price. Not saying it's a bad idea, but I think Andrew brought up some good points to consider as well. Wow, I just noticed this post is about 3 years old... so tell us, what did you decide?? While the idea may seem tempting, after it is right next door to your property, I figured I would throw this question out to you. What about venturing out into other kinds of investments? You seem to enjoy being a landlady, but has it become somewhat of a hobby for you? Its always smart to diversify your investments — take a look at the amount of people who bought multiple properties during the boom and are now paying the price. Not saying it’s a bad idea, but I think Andrew brought up some good points to consider as well.

Wow, I just noticed this post is about 3 years old… so tell us, what did you decide??

]]> By: Kenric http://www.iboughtaduplex.com/buying-a-duplex/cashflow-and-the-duplex-next-door.php/comment-page-1#comment-12494 Kenric Sat, 02 Jun 2007 22:25:27 +0000 http://www.iboughtaduplex.com/buying-a-duplex/cashflow-and-the-duplex-next-door.php#comment-12494 I thought that the insides required major work in this property. Given that you know the owners are very motivated, I don't think a lowball offer would be insulting to them. If you would like to take a shot at it, you should call your insurance company and find what the exact cost will be. Call your mortgage broker and find out what your rate will be. Based on those numbers and your probable rent, come up with a max. purchase price. I thought that the insides required major work in this property. Given that you know the owners are very motivated, I don’t think a lowball offer would be insulting to them.

If you would like to take a shot at it, you should call your insurance company and find what the exact cost will be. Call your mortgage broker and find out what your rate will be. Based on those numbers and your probable rent, come up with a max. purchase price.

]]> By: Andrew Paez http://www.iboughtaduplex.com/buying-a-duplex/cashflow-and-the-duplex-next-door.php/comment-page-1#comment-11062 Andrew Paez Wed, 30 May 2007 15:06:49 +0000 http://www.iboughtaduplex.com/buying-a-duplex/cashflow-and-the-duplex-next-door.php#comment-11062 Hi there. I believe you are on the right track with your questions to yourself regarding this duplex next door to you but I would make a few suggestions, for what they may be worth to you. 1. Don't forget an allowance for vacancy, maintenance, and repairs in your calculations. With cash flow at $50 for one of your scenarios, you'd might end up break-even on your proposition. 2. Definitely get a sense for what your loan would be since with these tight cash flow margins the rate will make a difference in your monthly profitability (you've already got that covered, but you want to know that rate and monthly payment). 3. Your last question is what I believe to be the critical one. If you think about it, you will have to come up with some percentage of the purchase price as a down payment, which will constitute, along with closing costs, your actual out-of-pocket investment in the property. So, if you had to put, say, $10,000 down to make this deal work, you might want to ask yourself what rate of return would you demand from an investment in order to make it worth your while to put those dollars in there. If the return is 5%, you can get that right now opening up an Internet-based bank account with little to no risk. Of course, your investment strategy may involve buy-and-hold where your objective is to grow your equity in the property while someone else pays for it and reap the reward of increased value (which, of course, is not guaranteed) and a nice income when the mortgage is paid off. Just keep in mind that you may be working at break-even on those units for a long time to come and will have to withstand vacancies, etc, while operating it at a low cash-on-cash return. If you want, say, 10% or better return, work the numbers to get that return on your Excel spreadsheet (I can send you one I use if you want) then base your offer on that rate of return for your cash investment and be prepared to walk away from the deal if the owner doesn't agree to it. From your posts it sounds like this owner wants out of this property and you can solve his problem for the right price. Heck, I'd even show him the numbers and explain why his price makes no sense; after all, you're an expert in this area since you live next door and operate similar units in the same neighborhood. Good luck! Hi there. I believe you are on the right track with your questions to yourself regarding this duplex next door to you but I would make a few suggestions, for what they may be worth to you.

1. Don’t forget an allowance for vacancy, maintenance, and repairs in your calculations. With cash flow at $50 for one of your scenarios, you’d might end up break-even on your proposition.

2. Definitely get a sense for what your loan would be since with these tight cash flow margins the rate will make a difference in your monthly profitability (you’ve already got that covered, but you want to know that rate and monthly payment).

3. Your last question is what I believe to be the critical one. If you think about it, you will have to come up with some percentage of the purchase price as a down payment, which will constitute, along with closing costs, your actual out-of-pocket investment in the property. So, if you had to put, say, $10,000 down to make this deal work, you might want to ask yourself what rate of return would you demand from an investment in order to make it worth your while to put those dollars in there. If the return is 5%, you can get that right now opening up an Internet-based bank account with little to no risk.

Of course, your investment strategy may involve buy-and-hold where your objective is to grow your equity in the property while someone else pays for it and reap the reward of increased value (which, of course, is not guaranteed) and a nice income when the mortgage is paid off. Just keep in mind that you may be working at break-even on those units for a long time to come and will have to withstand vacancies, etc, while operating it at a low cash-on-cash return.

If you want, say, 10% or better return, work the numbers to get that return on your Excel spreadsheet (I can send you one I use if you want) then base your offer on that rate of return for your cash investment and be prepared to walk away from the deal if the owner doesn’t agree to it. From your posts it sounds like this owner wants out of this property and you can solve his problem for the right price. Heck, I’d even show him the numbers and explain why his price makes no sense; after all, you’re an expert in this area since you live next door and operate similar units in the same neighborhood.

Good luck!

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