Updated over 5 years ago on . Most recent reply
First Duplex Question
Hi everyone!
I have a quick question about the first duplex property I intend to buy in a year or two to househack for my first step into real estate investing.
So the area I live in is relatively close to Boston, and mortgages are pretty high for the area. I have started doing the quick 50% rule of thumb formula (All Income x .5)- mortgage p&I and try to get a rough number to see if there is positive cash flow.
I plan on using an FHA 3.5% down loan, and I know that you must intend to live in one of the units for one year, so I run the numbers for the cashflow for after moving out of the 1 year of living in one of the two units.
However, I have not found a duplex that has had any positive cashflow after renting both units with the quick rule of thumb and was wondering if my best bet would be to buy something in in hopes of breaking even/ paying a little every month, but relying on the equity build, appreciation, and tax benefits.
I would love to then use that equity for a down payment for another duplex down the road ect.
Thank you!
Most Popular Reply
As a general principle I wouldn't recommend purchasing a home with a flat/negative monthly cash flow. Keep in mind that rental market fluctuates so you can't always assume that rental income with increase year-over-year.
Agree that it's becoming increasingly difficult to find value in towns near Boston, but if you continue to search there are nuggets that show up. Consider looking specifically for properties that have been on the market for 60+ days with the hopes that the seller is motivated to take a lower selling price.