Owner occupying my first Duplex in Las Vegas with a FHA loan
At first, I wanted to buy a fourplex to live in 1 unit and rent out the rest. With hopes that my tenants would pay my mortgage while I lived for free. Then, do the same year after year until I have a couple of properties under my belt and start to invest in other types of real estate. Fourplexes in Vegas are going for around 500-700k depending on the condition and area. I took the step to apply for a loan to learn that I only qualify for 380k. This forced me to reset my search from a fourplex to a duplex. I'm working with a realtor and he found a property for 375k. The problem is that with todays interest rates even if I rented out both units I wouldn't be able to cash flow at that purchase price. I would need to convince the seller to lower the purchase price to around 330k to be able to cashflow. Any thoughts or recommendations on what to do in this situation? How can I convince the seller to lower the price 45k? There aren't any offers on that property yet. Thank you in advance for any advise.
Put the offer you think makes sense. If they except, good, if they don’t keep looking.
@Karla Relova do the math and make the offer that makes sense to you. BTW, did you run the numbers to see if the property will cash flow if both units are rented? It's probably hard to make it work if you're only putting 3.5% down.
Hey Karla, props to you for getting started. Sounds like you have a couple of options here:
1) Take time to work on your finances and increase your buying power to afford a larger property - larger property -> more units to rent -> higher income. If you give it maybe another year or so to improve your finances, perhaps interest rates will come down in that time too so you can afford to buy more.
2) Tell your agent to submit your $330K offer on that duplex you found. The worst they can say is no.
3) Vegas is a tough market to cash flow in with a small down payment. If you're looking at a FHA loan with 3.5% down, you'll have a higher mortgage + PMI, which will make it harder to cashflow. If you can save up for a higher down payment over the next 1-2 years, you may be in a better position to find a property that you can cash flow on.
Wish you the best and keep going. This is just the beginning for you. Good luck.
Alternately, you could ask whether there is any possibility of seller financing.
Thank you to all who replied and shared your advice. At this moment I believe being patient and saving more money is the best route to take. I do not want to take a desperate decision and not have the deal work out. More money will help with purchase power and hopefully interest rates go down by then!
@Karla Relova put in an offer where your numbers make sense and then see where it goes. Ask your real estate agent to be aggressive in requiring a written response from the seller side. A seller is going to do what is their best interest as well so in my opinion there is no trying to convince the other side why this is the only offer that makes sense. It is better to find out what motivates the seller besides the price. Maybe timeframe is important, maybe the seller wants to lease back the property for some time, maybe the seller is worried that if they accept your offer that they will get hit with a long list of repairs during the inspection period...
Quote from @Michael Robbins:hi michael, that makes sense. I did just that and we were not able to come to an agreement but the experience of going back and forth with my needs (as the buyer) with the needs of the seller have been a learning experience. I agree that the agent is the negotiator and should be aggressive and creative at the time of structuring the offer. The more information we have about the seller the more we can leverage their needs. I appreciate your response.
@Karla Relova put in an offer where your numbers make sense and then see where it goes. Ask your real estate agent to be aggressive in requiring a written response from the seller side. A seller is going to do what is their best interest as well so in my opinion there is no trying to convince the other side why this is the only offer that makes sense. It is better to find out what motivates the seller besides the price. Maybe timeframe is important, maybe the seller wants to lease back the property for some time, maybe the seller is worried that if they accept your offer that they will get hit with a long list of repairs during the inspection period...