First time Investor ( wants advice)

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First time Investor ( wants advice)

Christian Cummings
Rental Property Investor · Wichita Falls, TX · Member since 2020 · 54 posts · 22 votes

Ok, so I'm looking into investing in this duplex using an FHA loan. The property is $119,500 after financing my Mortage should be around $900.

I’ll live in one side for a year then rent it out. The property is in Lawton Ok (Military town). I’m a little nervous but I really want to do the deal. But is this deal worth it? Both the units can rent 600 a month. With a little rehab I would up it to 650. I’m just nervous is it worth it?

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Chris Szepessy
Catskill, NY · Member since 2018 · 636 posts · 668 votes
6y

Once you account for Capex, maintenance, management, vacancy, etc, there won't be much, if any, money left for cash flow. Might even be negative cash flow at that point. Based off the info provided, it doesn't seem to be a good deal.

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  • Chris Szepessy
    Catskill, NY · Member since 2018 · 636 posts · 668 votes
    6y

    Once you account for Capex, maintenance, management, vacancy, etc, there won't be much, if any, money left for cash flow. Might even be negative cash flow at that point. Based off the info provided, it doesn't seem to be a good deal.

    6Reply
  • Jake Davis
    Investor · Burlington, NJ · Member since 2019 · 55 posts · 34 votes
    6y

    600$ a month for a duplex seems really low to me. Is there a reason why?

    1Reply
  • Brandon Cooper
    Rental Property Investor · Winston Salem, NC · Member since 2019 · 63 posts · 54 votes
    6y

    @Jake Davis area dependant. Thats what most would rent for around me given theyre 2/1

    1Reply
  • Kiera Underwood
    Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes
    6y

    @Christian Cummings I did a similar deal and it's been incredible. Great way to lower cost of living and have a tenant build your equity at the same time! I would upgrade your side while you live in it. That way you don't have to have a unit vacant for any more time than it naturally is vacant. Keep it for a year and then rent your renovated side out for the $650 when you move out to repeat the process! 

    2Reply
  • Christian Cummings
    OP
    Rental Property Investor · Wichita Falls, TX · Member since 2020 · 54 posts · 22 votes
    6y

    @Jake Davis the I mean with rehab I could up it. It’s a cheap area though. Two bed, two baths probably cap around 700 in that area.

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  • Christian Cummings
    OP
    Rental Property Investor · Wichita Falls, TX · Member since 2020 · 54 posts · 22 votes
    6y

    @Brandon Cooper yes it’s 2/1 that’s what they are renting for with a little rehab I could up it more.

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  • Christian Cummings
    OP
    Rental Property Investor · Wichita Falls, TX · Member since 2020 · 54 posts · 22 votes
    6y

    @Kiera Underwood the return starting out won’t be much that was my biggest thing. But I’m thinking more long term more than anything. I think I’m just nervous also.

    0Reply
  • Christian Cummings
    OP
    Rental Property Investor · Wichita Falls, TX · Member since 2020 · 54 posts · 22 votes
    6y

    @Chris Szepessy I already have a tenant in one unit. So they will be there at least a year.

    0Reply
  • Frank Dunn
    Rental Property Investor · Boston · Member since 2020 · 9 posts · 10 votes
    6y

    @Christian Cummings pull the trigger brother as long the location / potential / property overall makes sense. It will be your first time so you don't want to break ya back too much renovating and be sure to re analysis the type of upgrading will need to be down. ( don't over renovate) If you can increase the rents to market value you'll be good. Its all risk but make smart decisions. Feel free to connect. 

    3Reply
  • Christian Cummings
    OP
    Rental Property Investor · Wichita Falls, TX · Member since 2020 · 54 posts · 22 votes
    6y

    @Frank Dunn thanks man I’m anxious, and nervous. Different waters for me. But I’m ready

    0Reply
  • Robert Yarnell
    Chatsworth, NJ · Member since 2019 · 10 posts · 3 votes
    6y

    @Christian Cummings I've been really digging into the math of REI and just using the quick 50% rule, the deal certainly seems good to me...

    $1300 x 12 months = $36000 gross rent

    $36000 x 50% = $18000 for op exp's

    $900 mortgage x 12 months = $10800 annual

    mortgage

    $18000 - $10800 = $7200 cash flow

    $7200 ÷ 12 months = $600 per month...worth looking into!

    BP pros, am I totally missing something?

    0Reply
  • Robert Yarnell
    Chatsworth, NJ · Member since 2019 · 10 posts · 3 votes
    6y

    @Robert Yarnell MY BAD...$1300 x 12 = $15600 😬 Not a good deal anymore...sorry all!

    0Reply
  • Christian Cummings
    OP
    Rental Property Investor · Wichita Falls, TX · Member since 2020 · 54 posts · 22 votes
    6y

    @Robert Yarnell 900 is on the high end, I’m thinking it will be between 800-900

    1Reply
  • Matthew Irish-JonesBusiness Member
    Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
    6y

    @Christian Cummings you don’t have a high enough price to rent ratio. I don’t know what your specific line items are like taxes, water, etc... but a $1200-$1300 Rent roll may not cash flow after you move out.

    What is your projected cash flow assuming you were renting both sides?

    You usual need a $1500+ Rent roll for that purchase price.

    FHA loan into a duplex is definitely a great starting point but, this deal looks thin in the margins.

    Irish Jones Realty4.947 Reviews
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  • Christian Cummings
    OP
    Rental Property Investor · Wichita Falls, TX · Member since 2020 · 54 posts · 22 votes
    6y

    Thank you all for the advice!!! I really appreciate it. I might just wait it out till I find another.

    0Reply
  • Aneury Tamarez
    New Hartford, NY · Member since 2020 · 7 posts · 1 vote
    6y

    @Christian Cummings

    I don't think the Mortgage will be $900 on a $119,000.00 mortgage. I believe it will be around $1,000-$1,200.00 due to the PMI added to your mortgage. You should probably check with a mortgage reps and see if he could give you an estimate.

    Best of luck!

    0Reply
  • Jonny Abramson
    Real Estate Agent · Hampshire, IL · Member since 2019 · 28 posts · 17 votes
    6y

    @Christian Cummings ran the numbers on your property. I should state that I'm a noob with no properties but I've been studying and crunching numbers for the past year. Looking to do a very similar move to yours.

    I may have accidentally found your property and it looks like property taxes are about $1300. Mortgage payment would be around $850 with p&I, taxes and pmi. I was pretty modest with the expenses honestly. 5% for most categories but I did include 10% for property management. I always include property management because some day I plan on having many properties and I wont necessarily have time to manage all properties. In this case I would still want the property to cash flow in the event I need to get a property manager. Learned this from one of the awesome BP books.

    Anyway, based on the numbers you gave and esti.ayed closing costs of $3000 I'm showing positive cash flow of $30.71/mo and cash on cash return of 4.7%. This obviously doesnt leave any room for error. Maybe try to get the purchase price lower.

    Good luck!

    0Reply
  • Christian Cummings
    OP
    Rental Property Investor · Wichita Falls, TX · Member since 2020 · 54 posts · 22 votes
    6y

    @Jonny Abramson

    Sounds about right. I have zero closing cost just a down payment of 4,500.

    0Reply
  • Derek Hamilton
    New York, NY · Member since 2020 · 54 posts · 14 votes
    6y

    @Christian Cummings

    Doesn’t seem too profitable have you done a rent check on rentometer.com or any other site? How much would the upgrade cost you to raise the rent to 650? Do you think you can get the property cheaper?

    0Reply
  • Andres A.
    Specialist · Atlanta · Member since 2019 · 88 posts · 53 votes
    6y

    Based on the numbers, you will have to pay out of pocket for some of the expenses, but if you are currently paying more in rent and you are comfortable with the location of this duplex, it may be worth considering and negotiating the price lower

    0Reply
  • Christian Cummings
    OP
    Rental Property Investor · Wichita Falls, TX · Member since 2020 · 54 posts · 22 votes
    6y

    @Derek Hamilton yea I want to do some minor upgrades and take it to $650. I used Rentometer

    That’s a good price for the area

    0Reply
  • Derek Hamilton
    New York, NY · Member since 2020 · 54 posts · 14 votes
    6y
    Originally posted by @Christian Cummings:

    @Derek Hamilton yea I want to do some minor upgrades and take it to $650. I used Rentometer

    That’s a good price for the area

    Then if your mortgage payment numbers are correct I think you need to offer less for the purchase. 

    0Reply
  • Christian Cummings
    OP
    Rental Property Investor · Wichita Falls, TX · Member since 2020 · 54 posts · 22 votes
    6y

    @Derek Hamilton I’ll see if the seller will take a little less. The seller wanted to sell it cash didn’t want to finance so I feel lucky to get it at $119.5K.

    0Reply
  • Derek Hamilton
    New York, NY · Member since 2020 · 54 posts · 14 votes
    6y

    @Christian Cummings I get it sometimes the deal for you. When it’s business make sure there’s no feelings involved only numbers that fit your purpose.

    0Reply
  • John Ruffin
    Rental Property Investor · Member since 2020 · 1 post · 0 votes
    6y

    You don't have to guess if you plug the numbers in the BRRRR calculator. It'll be clear if the deal is solid or not.

    0Reply
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