Obsessing over a deal

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Obsessing over a deal

Dustin Reynolds
Steubenville, OH · Member since 2019 · 16 posts · 5 votes

I’m sure I’m not alone in this...  I’m obsessing Day and night over finding the best deal.  

I have a SFH that was my starter home 10 years ago. I bought it for $40k, the loan is down to about $25k. I net $400 a month from the house.

An off market deal presented itself to me. A duplex that rents out for $1,100 a month.  They will sell it to me for $22k, it needs some roof work, couple windows, interior paint and flooring.  I’m thinking $4-5k in repairs maybe slightly more.

I have $8k for a down payment, I planned to get the rest of the money from an unsecured loan from the bank.  Higher (6%)interest rate and its a 5yr note.  Payments would be around $300 a month all included... netting around $800.

The question I'm obsessing over is, do I sell my SFH and put the equity toward the duplex?? I figured the house should sell at least for 40-45. I feel like I'd rather have one property free and clear with a solid return. From there on out, stick with MFH's.

OR do I keep the SFH and net roughly $1,500 a month with about $600 in payments. Gut says sell the SFH and start over nearly debt free.

Obsessing 

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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
7y
Originally posted by @Dustin Reynolds:
Originally posted by @Joe Villeneuve:
Originally posted by @Dustin Reynolds:

@Joe Villeneuve thanks for the reply. Would you keep or sell the SFH?

 Need more info on options after sale...if sold.

Between the sell of the of the SFH and the cash I have on hand, I could buy and rehab the duplex.

I suppose I could use an unsecured loan to buy and rehab the duplex. Once the sell of the SFH, pay off the loan.

 Stop paying off loans on cash flow properties.  Why would you want to do that?  Your tenants are doing it for you.  Don't help them.  Paying them off is bad math.  Profits are made after you recover all the money you spend on a property.  The more you spend, the more you have to recover it, the longer it takes to recover, and the less you have to invest in the means to recover it.

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  • Taylor Clark
    Rental Property Investor · Bossier City, LA · Member since 2019 · 9 posts · 4 votes
    7y

    I’m in this predicament myself or at least I will be in this predicament within the next year. Great to see these responses!

    @Dustin Reynolds

    0Reply
  • Alyssa Dyer
    Rental Property Investor · Oklahoma City, OK · Member since 2017 · 1k+ posts · 694 votes
    7y

    @Dustin Reynolds if you're making solid returns from the single-family don't sell it! People look all day for good deals that cash flow. You've already done the hard part!

    1Reply
  • Dustin Reynolds
    OP
    Steubenville, OH · Member since 2019 · 16 posts · 5 votes
    7y
    Originally posted by @Alyssa Dyer:

    @Dustin Reynolds if you're making solid returns from the single-family don't sell it! People look all day for good deals that cash flow. You've already done the hard part!

    Thanks for your reply.

    So do I take my $8,000 and put it toward this duplex and finish paying for it with the unsecured loan?  I’m not a huge fan of “large” payments eating the rent.  I guess I look at it as paying the 8k so I can see a better monthly return... rather than cash in hand paying a larger payment...

    If I were to finance the whole deal with an unsecured loan( not sure if the bank would finance $28,000 unsecured, never asked.)  my payments would be $600-650.    But I’d have my $8,000 cash I saved, for a down payment/emergency fund... I suppose I could use that for another deal that the bank would finance with a conventional mortgage. 

    I get it, pull the trigger and make a deal!  I welcome the wisdom and appreciate everything everyone is contributing to the conversation. 

    0Reply
  • Alyssa Dyer
    Rental Property Investor · Oklahoma City, OK · Member since 2017 · 1k+ posts · 694 votes
    7y

    @Dustin Reynolds I do think it's important to have 3k/house as an emergency/cap ex fund. But if you get a home warranty you could cut into that with a little more security. At the same time I think having the least money in the unsecured loan is probably safest. 

    1Reply
  • Jared McCullough
    Member since 2019 · 122 posts · 44 votes
    7y
    Originally posted by @Dustin Reynolds:

    I’m sure I’m not alone in this...  I’m obsessing Day and night over finding the best deal.  

    I have a SFH that was my starter home 10 years ago. I bought it for $40k, the loan is down to about $25k. I net $400 a month from the house.

    An off market deal presented itself to me. A duplex that rents out for $1,100 a month.  They will sell it to me for $22k, it needs some roof work, couple windows, interior paint and flooring.  I’m thinking $4-5k in repairs maybe slightly more.

    I have $8k for a down payment, I planned to get the rest of the money from an unsecured loan from the bank.  Higher (6%)interest rate and its a 5yr note.  Payments would be around $300 a month all included... netting around $800.

    The question I'm obsessing over is, do I sell my SFH and put the equity toward the duplex?? I figured the house should sell at least for 40-45. I feel like I'd rather have one property free and clear with a solid return. From there on out, stick with MFH's.

    OR do I keep the SFH and net roughly $1,500 a month with about $600 in payments. Gut says sell the SFH and start over nearly debt free.

    Obsessing 

     Just realized you were from Steubenville. I live across the border in Pa around the Ohioville, Pa area. If you wouldn't mind an off topic question are these properties you own/looking at in Steubenville? I have had an eye on a few down that way for a few weeks now but have just begun researching the market in that area before I bother going to look.


    Jared

    0Reply
  • Dustin Reynolds
    OP
    Steubenville, OH · Member since 2019 · 16 posts · 5 votes
    7y
    Originally posted by @Jared McCullough:
    Originally posted by @Dustin Reynolds:

    I’m sure I’m not alone in this...  I’m obsessing Day and night over finding the best deal.  

    I have a SFH that was my starter home 10 years ago. I bought it for $40k, the loan is down to about $25k. I net $400 a month from the house.

    An off market deal presented itself to me. A duplex that rents out for $1,100 a month.  They will sell it to me for $22k, it needs some roof work, couple windows, interior paint and flooring.  I’m thinking $4-5k in repairs maybe slightly more.

    I have $8k for a down payment, I planned to get the rest of the money from an unsecured loan from the bank.  Higher (6%)interest rate and its a 5yr note.  Payments would be around $300 a month all included... netting around $800.

    The question I'm obsessing over is, do I sell my SFH and put the equity toward the duplex?? I figured the house should sell at least for 40-45. I feel like I'd rather have one property free and clear with a solid return. From there on out, stick with MFH's.

    OR do I keep the SFH and net roughly $1,500 a month with about $600 in payments. Gut says sell the SFH and start over nearly debt free.

    Obsessing 

     Just realized you were from Steubenville. I live across the border in Pa around the Ohioville, Pa area. If you wouldn't mind an off topic question are these properties you own/looking at in Steubenville? I have had an eye on a few down that way for a few weeks now but have just begun researching the market in that area before I bother going to look.


    Jared

    Hey Jared,

    A couple I’ve looked at are in Steubenville.  The ones you’re looking at on realtor.com... idk I’m not experienced enough to be the guy to tell you it’s a waste of time.  But one of the triplex’s I had a scheduled walk thru, the agent cancelled it the night before.  Turns out it was broken into the night before, there are a lot of drugs in some areas....  I think it’s all up to what you’re willing to put up with, while being a remote property manager.  I’m not going to buy anything inner city, I’m not from the inner city, I don’t know enough about it and I don’t have enough free time to deal with all the police reports, broken doors and windows.  

    It’s the nature of the business, but I’m choosing to invest elsewhere.  You can pick stuff up cheap and make money for sure.  It’s just not for me.  I know, drugs are everywhere, but the ones I’ve seen on realtor.com are in some rough areas.

    0Reply
  • Dustin Reynolds
    OP
    Steubenville, OH · Member since 2019 · 16 posts · 5 votes
    7y

    Hello,

    I went a different way to seal the deal!  I had initially intended to use an unsecured loan at 6%.  

    Long story short, I put one of my vehicles up as collateral, $10,000 @ 2.4%.  I wasn’t crazy about doing it tris way until the rates went up to 8.5-10.5% for unsecured.  Besides, my Toyota Rav 4 is 10yrs old, 160,000 miles on it.  Retail was like 9k-ish but my credit was so good they allowed a 10k-5yr loan.  No payments for 90 days... 

    Roof and window replacements estimate came back at $1,600.  The entire roof didn’t need replaced, just a couple sections and some shingles.  

    And the best part.....

    The owner accepted $16,000

    There’s a ton of cleaning for the upstairs apartment and I have to replace the refrigerator.  I think, fixing the roof, replacing flooring, windows and cleaning I should be able to rent the downstairs unit out, no problem.

    Maybe  another $3-4K upstairs and it’ll be ready to rent.  

    I’m pretty sure I will be under $25k all in for my first duplex.  I’m hoping that after I make the place nice and clean I can get maybe $1,300 between the two units.  It was renting for $1,100 in poor condition.

    I have to say with all the stress in planning and being patient.  I think it was worth it, I’m pretty happy with the deal.

    I guess it was still a long story...?

    1Reply
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