Stillwater, OK · Member since 2017 · 4 posts · 2 votes
Considering buying a duplex as primary residence. Cost is $220K. Putting 3.5% down for FHA.
Mortgage which includes PMI insurance, taxes, house insurance, principal, and interest is $1,570.
Rent for one unit is $900. So $1800 when we're no longer living there.
Deal or no deal?
Real Estate Broker · Raleigh, NC · Member since 2017 · 174 posts · 69 votes
8y
There are many other factors to consider- looks like you haven't factored in Vacancy, repairs, CapEx, Property Management fees (once you move out as primary residence- unless you're willing to manage it yourself) which eats into your overall cost of Investment/ownership- from the numbers you gave it seems like you'd be at a negative cash flow if you factor all these in.
A quick rule of thumb: with the Purchase price being $220K and rent being $1800/month, it doesn't even meet the 1% rule , if it were to be rented for 1% (220K x 0.01= $2200/month), it would most likely work out for you but this doesn't seem like the numbers work.
Long story short, no deal- unless you can raise the rent and/or lower your PITI.
Stillwater, OK · Member since 2017 · 4 posts · 2 votes
8y
The market in the town has been growing a lot in the last few years. Rent has gone up (and will continue to) and property prices have increased (and will probably continue to). The town is growing. The rule of thumb, the lowest what I've seen in the town is (220K x 0.0082 = $1800/month).
I guess my question is how can one do a rule of thumb with a growing market?
Rental Property Investor · Buffalo, NY · Member since 2017 · 257 posts · 130 votes
8y
You do rule of thumb with current numbers. And even if the market does increase it will not be as favorable to your monthly rental cash flow as it will to appreciation.
Rent is too low for that payment/price of duplex. When you do move you will have a duplex that can't even pay for itself. Be patient for a better deal. Better to rent for now.