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Hey everybody, it's Brandon. So I was just on the phone with a gentleman who was looking to invest in Waco, Texas, and we were just talking about Waco a little bit. So I pulled up realtor.com and I looked at the prices, and I thought, hey, they're actually not that bad here. Then I thought, when I get off the phone with them, I'm going to run the numbers and see what Waco looks like for a small multi-family. Then I thought, why don't I record it and put it on my Instagram so other people can see what I'm doing. Sound good?
So this one, I went to realtor.com. It's just one website to find properties. I typed in Waco, Texas, and I searched. Up here at the top, I chose property type multi-family. Let's do that. Then I don't want to see the ones that are already pending or contingent, so I'm going to hide pending and contingent. Now I'm left with just properties in Waco, Texas that are multi-family. So we've got things from $753,000 to $39,000, kind of cool-looking properties, $325,000, all over the place. I like this one on the right side here. This is the first one I have not analyzed yet. We're doing this live right now, but I saw this one and it said $280,000. There's another one here on the left, and I thought this looks interesting because of the two-car garage. Typically this layout I like, because usually, not always, but many times, the water and the sewer are separated, because these are newer properties. This was built in 2004, so chances are the water meters are separate, which means the landlord doesn't pay water, which is always great for multifamily. I wanted to analyze this deal, and again, I just wanted you all to watch me do it. There are no interior pictures, so I have to make some assumptions today. Please don't go buy this deal just because I analyzed it.
Here it says, "Great opportunity in Cougar Ridge to get your own home. Cougar Ridge is funny, and an investment property at the same time. This single-story brick duplex features two three-bedroom, two-bath units located in the coveted China Springs ISD," so it must be a coveted school district. "The units feature open floor plans with laundry hookups, a two-car garage, and a fenced backyard for residents to enjoy. Lake Waco Trail is just a short ride away and provides a great way to relax. Don't miss your opportunity in one of the growing areas of Waco." I don't know much about Waco, but this looks like an interesting property. Can we run the numbers together?
Yeah. I'm going to go over to BiggerPockets and click on Tools in the navigation bar, which brings up the calculators. We've got about five main calculators: fix and flip, rental, BRRRR, wholesaling, and rehab. This is basically a rental, and I'm assuming it's already fixed up, so let's go with the basic rental property calculator for buy and hold. We're going to call it a title. I'm going to burn through this quickly and not explain everything I'm doing. The Waco, Texas duplex, the address, I'm just going to copy and paste the address. I already copied it into my clipboard, so there it is. Just basic copying and pasting, which everyone here should be able to do.
Taxes, I don't know what those are. Well, I'm going to go over to realtor.com and figure it out. If I scroll down on realtor.com, oftentimes it'll tell me. There it is: taxes about six thousand dollars, just shy of six thousand. So I'm going to put six thousand dollars on this one. I can add a photo, why not? I like adding photos, so I'll add a photo and select the file from my desktop. Description: I'm going to put what the agent wrote here, which is good enough for me. That's it for page one.
Let's go to page two. What's the purchase price? Let's start with what they're asking, which is $280,000. What's it worth when it's all fixed up? Well, it probably is fixed up, so let's do that. If you don't know how to find that, hover over the question marks. Closing costs, let's call it $4,000. Repair costs: does it need any repairs? There's always something. Let's call it $2,000. I don't actually know. I'm going to put down a 20% down payment, with a loan at 4.5% interest, amortized over 30 years. I'm not going to do the other ones for now, just to keep this quick and dirty.
Now, what do these units rent for? I'm going to go to Rentometer. Rentometer is a site I use for quick and dirty numbers. I'll put in the address and see what they say. For a three-bedroom house or duplex, twelve hundred is what I'm guessing. Is that appropriate? Let's find out for this neighborhood. According to Rentometer, I just guessed at it, but $1,283 is the average and $1,350 is the median, so we could potentially get up to $1,350. That's good to know. In fact, a four-bedroom is up to $1,653, which is crazy. That's good, so this is a high-rent area. Below that I can look at some of the other properties to see how similar they are to mine, but for quick and dirty right now, let's go with $1,300. I'm going to go a little higher than the average because this is probably going to be a little nicer, and it has the two-car garage and all that, but I'm not going quite to the median. Let's go with $1,300 to keep it conservative.
Where's my unit breakdown? There it is. Unit A and unit B, let's go $1,300 each. Does the listing say what the current rent is? Sometimes it will, but this one doesn't really say that, which is okay. Is there any other income, like laundry income or anything like that? Probably not. Remember, I said earlier that the reason I like side-by-side duplexes, especially newer ones, is that the water and sewer lines are usually separated. I'm going to assume that's the case here. Each tenant will pay their own electricity. The tenants will pay their own water, sewer, and garbage. Insurance is probably going to run me about $800 a month. In this case, I probably won't do lawn care, because sometimes on duplexes you have to handle it, but since they have their own garages and their own yards, I'm going to make the tenants responsible for their own lawn care, so I don't have to worry about that either.
Vacancy: I usually do around 5%. Repairs and maintenance is anywhere between 5% and 10%, depending on the age of the home. This is a newer property, so I'm going with 5% of the rent. Same thing for CapEx. CapEx is the big-ticket items you save up for: a new roof every 20 years, new plumbing every 40 years, new windows every 30 years, new appliances every 10 years. CapEx is just saving up for those items. I'm assuming a property manager at 10% to manage the rent. Then I'm going to assume we grow by, let's call it, 2% income growth, 2% property value growth, and 2% expense growth. Someday when I sell the property, I'll have to pay a real estate agent and closing costs. Those are sales expenses.
Someday, let's calculate the results and find out what happens. Here we go: five, four, three, two. I have no idea. My guess is it's not going to be a very good deal as is, but I always say every property has a number that could make it a good deal. Let's find out. Based on our numbers, we just ran monthly income of $2,600 a month and monthly expenses of $2,384, which means our estimated cash flow is $215 a month. That's not terrible. If you recall from my criteria the other day, I said I want to get at least $100 per month per unit as my baseline, and $215 qualifies. But remember my cash-on-cash return percentage. I've said it twice now on Instagram lately: I want a 12% return. I am not anywhere close to 12%. So I could start crying and say there are no good deals in my market and go back to watch The Bachelor, because I think that starts soon right after Dancing with the Stars gets done. I'm kidding, of course. Every property has the number.
So let's find it. Edit report. Instead of paying $280,000 for this property, what if we paid $230,000? Let's go crazy with $230,000. I know people are saying they're not going to take a $50,000 discount, probably not, but you never know, right? This also shows why off-market deals are usually better. Let's check it out. We're still only at a 9.6% cash-on-cash return, but our cash flow bumps to $417, so we're getting closer. If I were getting a $50,000 discount, I might be okay with a 10% return. We're probably getting close. Let's jump even more. Let's go down to $210,000. Again, I doubt they'll take that, but it's worth running the numbers to find out. It's also why I like the BRRRR strategy, because you can usually get better deals. At $210,000, I'm at 12.47% cash-on-cash return. They're asking $280,000, so I'd probably need to get around $220,000 to make this deal worthwhile.
Now, granted, if I believe this market is going to appreciate really, really hot, then maybe I'd accept a lower cash-on-cash return, or maybe other reasons would matter. Looking at this chart, year 1, 2, 5, 10, 15, 20, if I bought this property at $210,000 and held it for 15 years, look how much profit I'd have if I sold it over those 15 years. Three hundred grand in profit is a 14.35% return. I can see my equity climbing, I can see my loan getting paid off, I can see my property value going up over time, and I see my cash flow going up every year, hopefully. I'm making about $6,000 a year from year one, which comes to almost $7,300 by year five and about $9,000 by year 10. You can see it going up over time, which is a cool way to look at the deal.
So to me, this duplex, I'd probably pay somewhere in the $220,000 to $230,000, maybe $240,000 range, maybe a slightly lower cash-on-cash return, but maybe you're fine with that. Maybe you're good with a 5% return and can pay the full $280,000. I don't know, I'm not going to tell you what to do or not to do. But one final thing you can also download, if you don't know this, with the BP calculators: you can download a PDF report like this, and it shows all those numbers nicely and neatly, so you can show a lender, a portfolio lender, a hard money lender, your spouse, anybody you want, your partners, that you've done your homework. This makes me feel really good, so before I make an offer on a property, I like to do this.
That is how I run the numbers quickly, efficiently, easily, and accurately on rental properties. It looks like in Waco, it's not the end of the world. They'd probably say no, but that's why this is just a numbers game. I might make an offer on this property, and they'll probably say no, but later on maybe they'll say yes, maybe it's been sitting on the market a while, or maybe I need to find a fixer-upper so I can build equity and get my cash-on-cash return higher, because I'm going to do the BRRRR strategy. If this was helpful, make sure you give the thumbs-up button or the heart button below this video, and follow us at BiggerPockets everywhere, and follow me personally on Instagram at Beardy Brandon if you're not already. I'm going to get out of here, because my little girl just made some snickerdoodle cookies and she's making me a heart-shaped one because she loves me. Thank you so much, you guys have a great day.