After negotiating for most of the week last week on a duplex in Regina. I ultimately decided to walk away. The property itself has very good fundamentals and here was my analysis.
- List price $185,000
- $750 rent per side = $1500 total (By August 1st, 2011)
- Taxes 2010 $1383.00 ($115.25/ month)
- Insurance about $1100 a year
- Property Management would've been $170 a month
- Vacancy allowance and Repairs and Maintenance of 5% gross rents (75 bucks each per month)
- Mortgage at 5% would've been $865 a month.
- $37000 down payment (Required 20% for rental property)
- About $4500 extra cash to close (Legal, Appraisals, Inspections, and one month reserve)
About $100 cashflow was what I calculated with these fairly conservative numbers. Even at a 6% mortgage it still cashflowed about $20 bucks... meanwhile variable rates can be had at 2.1% at the moment... and the tenants are existing and interested in staying as well vacancy rates in Regina are below 1% at the moment. (So I'm saying actual cashflow would've been higher (up to about $400 a month if using aggressive numbers)
The issues (no property is 100% perfect or else I would've just snapped it up)
- There are obvious moisture issues in the basement meaning foundation work would have to be done to create a proper seal around the foundation and prevent future leaks.
- The north wall faces a laneway that the city would probably not allow us to dig up so at least on that one wall anything we need to do to fix the moisture problem would have to be done on the inside. Damp-proof wall, internal weeping tile to sump pump
- To fix the moisture issues themselves my Property Manager estimated around $9000... give a regular contingency of 15% or so and you have over $10K for it to be done right.
- Windows are drafty
- Older house needs updated flooring, kitchen, etc (not necessary, but I like to have nice places for my tenants)
- The units are actually very small (1056 sq ft for BOTH sides... so 528 sq ft for each side and they are TWO bedrooms... how the heck?)
- I would be buying it sight unseen since I don't live in Regina and must trust that the inspectors do a good job (After watching too many Holmes on Homes and Holmes Inspection on HGTV) I must admit I'm fearful of NOT getting a proper inspection.
I'm gonna check back on this property in a month or two... who knows... it may still be on the market at that point. Anyone is welcome to it ... I like to think that there is always another deal.