Trying to buy my first duplex

10 Replies

I am 40 years old and live in Altoona , Pa.
I own my single family home. Buy that I mean I have no mortgage and I have the deed. I am trying to buy my first duplex to get some cash flow and to have a passive income. My credit is fair and I would like to get a fha203k loan. Is that a good way to go about getting my duplex.

@George B.  please stop repeatedly posting this post.

@George B. I doubt you would qualify for a FHA/203k loan because your name is on the deed of the house you already own. (If that is the case) My encouragement would be to use the equity in your home as downpayment or even pay cash for a duplex. Assuming they are cheap enough and you have enough equity. Whatever you do don't get stuck where your at. Make it happen!

George, First of all thanks for sharing your story.  That is kind of an open ended question you are asking.  Without knowing all the numbers involved one could not say.

In general, borrowing money at great interest rates is not a bad way to go.  You just have to keep in mind all the holding cost you will have while each month.

Do your homework on the kind of money you can receive each month, subtract all your expenses and see what is left.  If what is left gets you excited than go for it.

Good luck, Jim

@George B.  

Good morning. In order to get an FHA loan, you will need to be a resident at the new property. If you are okay with moving to the Duplex, this could be a nice way to go. In that case, I would recommend keeping the single family home and renting it out for monthly cash flow.

FHA 203k Loans: What Are They? What Are the Benefits?

Getting a Mortgage Loan for a Fixer-Upper: A Primer on FHA 203k Loans

The idea of buying a fixer-upper and turning it into your dream abode can seem so perfect -- every nook and cranny just to your specifications! The reality, however, can be harsh. When you realize how much it will cost to remodel, you often also realize that you can't afford it. Or you find out that a lender won't give you a loan because the home is considered "uninhabitable" as it is. That's where an FHA 203k loan comes in.

An FHA 203k loan is a loan backed by the federal government and given to buyers who want to buy a damaged or older home and do repairs on it. Here's how it works: Let's say you want to buy a home that needs a brand-new bathroom and kitchen. An FHA 203k lender would then give you the money to buy (or refinance) the house plus the money to do the necessary renovations to the kitchen and bathroom. Often the loan will also include: 1) an up to 20 percent "contingency reserve" so that you will have the funds to complete the remodel in the event it ends up costing more than the estimates suggested and/or 2) a provision that gives you up to about six months of mortgage payments so you can live elsewhere while you're remodeling, but still pay the mortgage payments on the new home.

Which repairs qualify?

There are two main types of FHA 203k mortgage loans. The first is the regular 203k, which is given for properties that need structural repairs such as a new roof or a room addition; the second is the streamlined 203k, which is given for non-structural repairs such as painting and new appliances. Among the other repairs that an FHA 203k will cover: decks, patios, bathroom and kitchen remodels, flooring, plumbing, new siding, additions to the home such as a second story, and heating and air conditioning systems. The program will not cover so-called "luxury" improvements such as adding a tennis court or pool to the property.

How much money can you get?

The maximum amount of money a lender will give you under an FHA 203k depends on the type of loan you get (regular vs. streamlined). With a regular FHA 203k, the maximum amount you can get is the lesser of these two amounts: 1) the as-is value of the property plus repair costs, or 2) 110 percent of the estimated value of the property once you do the repairs. With a streamlined loan, you can get a loan for the purchase price of the home plus up to $35,000. To determine the as-is value of the property or the estimated value of the property post-repair, you may need to have an appraisal done. You can read details on how these estimates are made here. You will be required to put down 3.5 percent, but the money can come from a family member, employer or charitable organization.

What kinds of properties qualify?

Qualifying homes include: a one- to four-family home that has been completed for a least a year; a home that has been torn down, provided that some of the existing foundation is still in place; a home that you want to move to a new location. The home cannot be a co-op, but some condos are eligible. For a full list of eligible properties, see this. Your property will also have to qualify under the usual FHA requirements. For example, its value cannot exceed a certain maximum amount, which depends on where you live.

What are the pros and cons of these loans?

The main benefit of these loans is that they give you the ability to buy a home in need of repairs that you might not otherwise have been able to afford to buy. Plus, the down payment requirements are minimal, and often you get decent interest rates (note that the interest rates and discount points will vary by 203k lender, so it's important to make sure that you're getting a good deal on the loan).

The downsides are that not all properties qualify, there are limits on the funding you can get and applying for the loan isn't easy. For example, to apply for the loan you may need to hire an independent consultant to prepare the exhibits required (to get the loan, you have to provide a detailed proposal of the work you want to do and cost estimates for each item). For more information on 203k loans, check out.

Im guessing that your not on planning on living on the duplex. No FHA 203k will not work. You will need to go conventional.

What would be in your opinion the best way to go about buying duplexes. Also what would be a good 5 year and ten year plan to have a significant cash flow and passive income in ten years or sooner

What do you think is the best 5 year and ten year plan is. To have significant cash flow and passive income from duplexes with in 10 years or sooner

The duplex is thirty thousand and renovation about fifth teen thousand so about fifty thousand total. The two apt. Will rent for 500 a month each. Plus tenants pay own utilities and one apt. Is already rented. Do this sound like a good investment to you.

Yes that sounds like a good investment without knowing all the details.

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