Looking at Duplex but is this a good move?

19 Replies

I need to move out of my apartment by November.  It's a problem that gives me room to do my first investment.  I found a duplex that is FULLY rented now, top and bottom floor.  Owner is willing to sell contingent on top floor being vacant beause I want the top floor, and tenant lease is almost up.  I am paying $1400/mo rent now and could be paying a mortgage.  Though, it is a small place, I'd have to sell my furniture (more cash, hello!), it will give me the rent from downstairs to pay the mortgage.  The rent is about $650/per apt, house asking is $135000.  My concerns:  1) should I leave both tenants in there, and find another place of my own? or 2) should I take the upstairs, and if I do, what are some things to consider?  

Im not prepared for both apts to be vacated since I just started a new job, have nontraditional income, and need that security.  The seller wont do seller financing, so if I want this, I have to be very CREATIVE, find a no/little money down option, or other financing.

The duplex is small, in a single family home area, total house sq footage is about 1050.  However, it is just 2 miles from the beach, great vacation rental potential down the line.  

Any thoughts appreciated! Thank you!

@Mary Ann In principle, your idea of "house hacking" is excellent. In practice, there are still many unknown factors (to me) to know whether THIS one is to be recommended. In the meantime, it is a good idea for you to search for a Lender who doesn't mind your "nontraditional" income. Find out their required deposit, and interest rate? And how much EXTRA will you need to borrow along the way for capital expenditure items such as a new roof?

It's VERY small for a duplex (probably originally made for a single family)?

Good that you have until November to conclude your decision. Good that you've already started. I recommend before submitting an offer, keep looking elsewhere too. All the best...

@Mary Ann

  I think it is a good idea. Talk with successful people around you about this idea, possibly people that you don't know.  Stay away and filter the noise from the people near you that don't have what you want or are ones that possibly could profit from this.

Frank

Frank Romine, Real Estate Agent in CA (#01957844)

When it comes to financing, you can get smaller down payments and longer loan periods if you reside in the property as apposed to renting it.  So simply going on your desire to use the smallest amount of money and lower monthly payments I would suggest moving in. 

@Mary Ann

To answer your questions I think it depends on what your needs are at the moment. If you're needing a place to move into and are able to obtain FHA financing the first option you mentioned of moving into one of the units is a great way to get into a property for little down and lock in financing long term. You mentioned that you started a new job and have "non traditional income" therefore finding a lender may be a bit of a challenge, but there are ways to get creative.

A couple of other things to consider are whether or not the income from the other unit will cover your mortgage. Even if your mortgage is less than the $650/mo rent from the other unit you will always have repairs, taxes, turnover and other issues to deal with that will eat into your cash flow.

The important thing is to not rush into any property. You have a little time so vet some additional properties and compare cash flows, rates of return and other economic factors such as financing you are able to obtain and the location of the property. Also see if you can find an investor friendly agent to help you in your search and represent you. I don't know how your area is, but in mine Buyer agents typically don't charge their clients a fee as the commission comes from the Seller, if that's the case it might behoove you to have someone represent your interests in the transaction. If you can get it under contract speak with some professionals or fellow investors and see what their thoughts are and as always speak with an attorney and/or your CPA to see how this would affect your tax situation.

It sounds like my only hurdle would be financing THIS or something else. It's hard NOT to get excited about this, but I have to stay level-headed.  I was able to get my hands on the expenses and it looks like this:

Total rents 2014 = 15,245

Total expenses 2014 = 6,000 (prop insurance, terminix insurance, taxes, utilities)

The seller did all his own repairs and maintenance.  

These numbers look good to me, but any thoughts appreciated.

Originally posted by @Brent Coombs :

@Mary Ann In principle, your idea of "house hacking" is excellent. In practice, there are still many unknown factors (to me) to know whether THIS one is to be recommended. In the meantime, it is a good idea for you to search for a Lender who doesn't mind your "nontraditional" income. Find out their required deposit, and interest rate? And how much EXTRA will you need to borrow along the way for capital expenditure items such as a new roof?

It's VERY small for a duplex (probably originally made for a single family)?

Good that you have until November to conclude your decision. Good that you've already started. I recommend before submitting an offer, keep looking elsewhere too. All the best...

Yes, it used to be a single family. The seller converted into 2 small apartments.  

@Frank Romine  Thanks for the wise words, yes, definitely will keep that in mind!

Hi I like the house "hacking" idea, but would think you could find a better "hack" in Tampa. It's probably more a life style issue, but you can't beat the experience at very little risk!

Good luck with everything.

@Zachary H.

Thats my next step to find an investor friendly real estate agent. Unfortunately, alot of the duplexes I am seeing in Tampa look run down or are in bad neighborhoods. It presents other issues to consider. The one Im looking at now was in a great locale, stable SFH community, and lots of outdoor, quiet space.

My hurdle is financing.  I have a loan with a bank now and it is going very well with them, and I may just call them up and chat.  

@Ken A.

Thanks for your thoughts, and yes, it is a lifestyle issue. Im having a hard time finding NICE duplexes, that are more than 1 story tall, in good neighborhoods.  This is my first REAL look at a property.  I'll keep my options open, but will keep exploring this.

Hi @Mary Ann you mentioned utilities in the expenses.  What utilities?  Just water / trash? or does that include power / cable.  I know sometimes when single families are split like this they never become separately  metered.  This is something to consider as if / when you move out and do have two tenants in there this can eat up your profits.  Also, I'd look to see if this property is zoned for multi-family or single family residential.  

Last thing, I'm in Pinellas, is this in Tampa proper? Just curious.

@Robert Curls  I dont think they are separately metered but I will ask, its in Tampa.  

Sounds like the consensus on here is that it's a good move but I should keep looking to be sure.  Except this is one of the most nicest duplexes Ive seen, where others have been pretty dumpy.  I have to figure out how to finance this without a trad loan or seller financing? I will be able to do this easier in a few months and will probably go do another walk through at the place soon.

Hi @Mary Ann I would suggest you read the article on how to analyze deals on here and then create your own spreadsheet in excel based off that article and do the numbers. Right now it looks like you would have a cashflow of $9245 but you are missing so many factors like you're going to be living in one of the units which is going to take away from that number also are you going to do repairs/maintenance if so you still need to put something in there for material if not you need to budget for that altogether which eats into that money. I'm in the same boat here in Dayton trying to house hack, once you run the numbers it makes it a whole lot easier. I hope this helps good luck. 

@Mary Ann #2 all the way depending on the financing. You may find traditional financing easier when it is your primary residence.  Also don't forget to stay true to your life goals which real estate investing should be supporting.  Ask yourself how will this impact my 2015 goals and will it lay the foundation for my  2016 goals?

All the best and it's a good problem to have. :)

@Mary Ann

Going owner occupied on a 2-4 unit is a great way to get started. @April Littleton  is working on that now, and she is going to do well. 

Anytime you're looking at a property, It's the expense's that aren't shown that always concern me. Especially if you have little to no reserves.

if you get traditional financing, will you be required to also get Flood insurance? If so, that can be a huge expenses.

Waht deferred maintenance is there, or items nearing end of life? Roof, Air Conditioner, etc?

There is a potential opportunity also. If you converted the property back to a single family at a later date, how would that impact the value?

Looks like I only qualify for hard money on this purchase, gonna keep trying! I've never used hard money before. Is this good/bad?

Originally posted by @Tatum F. :

@Mary Ann #2 all the way depending on the financing. You may find traditional financing easier when it is your primary residence.  Also don't forget to stay true to your life goals which real estate investing should be supporting.  Ask yourself how will this impact my 2015 goals and will it lay the foundation for my  2016 goals?

All the best and it's a good problem to have. :)

 Yes, this would definitely set a good foundation for me, this or better property.

Originally posted by @Darrin Carey :

@Mary Ann

Going owner occupied on a 2-4 unit is a great way to get started. @April Littleton  is working on that now, and she is going to do well. 

Anytime you're looking at a property, It's the expense's that aren't shown that always concern me. Especially if you have little to no reserves.

if you get traditional financing, will you be required to also get Flood insurance? If so, that can be a huge expenses.

Waht deferred maintenance is there, or items nearing end of life? Roof, Air Conditioner, etc?

There is a potential opportunity also. If you converted the property back to a single family at a later date, how would that impact the value?

Looks like I may get hard money, unless I wait a few more months to get the income from my new job on paper. Funny you mentioned SFH, alot of people checking out the place want to turn it back into a SFH, I rather keep it as a duplex because I need a place to live. But turning it back to a SFH is in the plan, except there is a tenant that would need to be vacated before hand.

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