I used your 30% figure for expenses in my calculation, but I think that 30% for a 30-year old duplex is too low. I’d use 40%. At 40%, your negative cash flow jumps to over $200/month.
Seller financing is nice, but not if the property won’t support it.
I don’t know where you live, but nice 30-year old duplexes in Phoenix are going for $90-$120,000. What is your estimation of value for this property? Almost $90,000 per unit sounds awfully steep.
If you’re paying full market value, and you’re holding this property with a negative cash flow, when do you make some money? If you’re counting on appreciation, I’d walk. You need to make money going into the deal. I don’t see that here.
Thanks to everyone for their inputs and opinions!! What a wealth of information. I did not intend to get everyone up in arms but it proved to be very valuable. Here is some more specifics on the deal.
100% owner financing - 174,500 @ 7% for 30 years
30 year old duplex
rents at 720 and 850
long term tenants
property in exellent condition
high growth area
The owner is offering financing to ease his tax burden by taking installments.
By my calculations expenses are 30%.
Based on your numbers you need to get the price down to $135k with the same terms to make a positive cash flow of $200 a month. That’s based on your numbers.
again, due I dare? - Posted by Jeff