Starting out.. buy and hold.. what's a deal?

Starting out.. buy and hold.. what's a deal?

Banker · West Seneca, NY · Member since 2008 · 13 posts · 1 vote

Right now I'm just starting out.

Looking for a duplex to purchase, and finance with NY SONYMA or FHA mortgage.

I work an entry level job at a global bank, so I qualify for all the lower income mortgages, and I am a first time buyer.

I am looking in the Buffalo, NY area.

Right now I need a place to live in half of it, and rent out the other half.

Is there a formula that I can follow to figure out what to offer, or what a deal is?

I'm trying to cover the mortgage with renting out one unit, and myself living in the other side for nothing, but is there more to it than that?

Thanks,
Justin

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  • Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    18y

    Justin,
    The rule of thumb for rentals is that expenses will take up 50% of your rent. Search for "50% rule" to read other posts on this topic. Even when you live in a home you own, you incur some of those expenses (utilities, taxes, insurance, maintenance) though not others (property management, vacancies, legal costs, advertising, make ready between tenants, etc.) We don't always track them very carefully, but they're there.

    If by free, you mean want the rent on one half to cover your mortgage, that's a straightforward calculation. If you want the rent to cover the mortgage and all the expenses, then you need a much better deal. Figure that your expenses on the rented side will be 50% of the rent. Since you avoid some on your side, figure 35% of what the rent would be. If the two halves are the same, then 85% of the rent on the rented side goes to the total expenses. Then you need to keep the payment down to 15% of the rent. That may be a challenge.

    You might check out this thread:
    http://forums.biggerpockets.com/viewtopic.php?t=13335
    and this one:
    http://forums.biggerpockets.com//viewtopic.php?p=64761

    Jon

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