digest
Short Summary
Main recommendation: To quickly analyze a rental property, run the numbers in the BiggerPockets buy-and-hold rental calculator using realistic assumptions (taxes, price, rent, expenses, vacancy, repairs, CapEx, management), then negotiate the price until the cash-on-cash return meets your target. In this Waco, Texas duplex example, the asking price of $280,000 produced only about 5% cash-on-cash return, and the speaker concluded the deal worked better near $210,000 to $230,000.
Key Points
- Start with a market search on realtor.com, filtering by property type (multi-family) and hiding pending or contingent listings, then pick the properties to analyze.
- Use Rentometer to check comparable rents for the neighborhood before choosing an assumed monthly rent; the speaker used $1,300 per unit, just above the $1,283 average but below the $1,350 median.
- Newer side-by-side duplexes often have separate water and sewer lines, so the landlord may not pay water, which the speaker considers favorable for multifamily.
- Price sensitivity matters: cash-on-cash return rose from about 5% at $280,000 to 9.6% at $230,000, and 12.47% at $210,000, which is why off-market or discounted deals are preferred.
- The BRRRR strategy is cited as a way to find better deals, since buying below market and improving the property can raise the return.
Details Worth Noting
- Concrete instructions:
- Go to BiggerPockets, click Tools, and choose the basic rental property calculator (buy and hold).
- Find property taxes on the listing page (here, about $6,000 per year).
- Enter the purchase price (asking $280,000) and an estimated after-repair value; closing costs assumed at $4,000 and repairs at $2,000.
- Assume a 20% down payment, a 4.5% loan rate, and a 30-year amortization.
- Estimate expenses: insurance about $800 per month, tenants pay their own electricity, water, sewer, garbage, and lawn care; vacancy about 5% of rent; repairs and maintenance 5% to 10% of rent depending on age (5% for a newer property); CapEx reserves for big-ticket items (roof about every 20 years, plumbing about every 40 years, windows about every 30 years, appliances about every 10 years); property management at 10% of rent.
- Assume 2% annual growth in income, property value, and expenses; include sales costs (agent and closing) for a future sale.
- Use the "Edit report" function to test different purchase prices and compare cash-on-cash return.
- Download the PDF report to share with lenders, partners, or others as evidence of your analysis.
- The speaker's personal screening criteria: at least $100 per month cash flow per unit as a baseline, and a target cash-on-cash return of 12%.
- Results at the $280,000 price: monthly income about $2,600, expenses about $2,384, cash flow about $215 per month, well below the 12% target.
- Projected profit over 15 years at $210,000 was about $300,000, described as a 14.35% return, with annual cash flow rising from about $6,000 in year one to about $9,000 by year 10.
- The speaker stresses that the analysis is quick-and-dirty, relies on assumptions because no interior photos were available, and viewers should not buy the property just because it was analyzed.
Bottom Line
At the listed price, this Waco duplex does not meet the speaker's return target, so the deal only becomes attractive if the purchase price drops substantially, roughly into the $210,000 to $230,000 range.
