Looking to buy first duplex/triplex/quadplex

1 Reply

Like the title says, I am looking to purchase my first duplex/triplex/quadplex. My thinking is because I do not have enough funds to purchase a pure positive cash flowing investment property I will purchase a multi family property (using 5% down), live in one unit for a year or so and eventually use the unit I was living in to generate cash flow on this property. But I have a few questions first...

1) When I am evaluating how much of a multi family property I can afford, how do the rents from current tenants in the property (with leases in place) factor into the purchase price/my income from a lenders perspective?

2) Should I strictly base the purchase price on the 2% rule? I'm finding this extremely difficult even with foreclosure listings.

3) When I look at a  2/1 duplex that is listed for $225,000, has taxes of 6,660, has both units rented for 950 and 850, I calculate my payments (taxes included) to be roughly 1,500 a month. Does this seem like a bad deal? How much would you pay for this property? 

Thank you in advance.

@Michael McDermott   

Here are some thoughts.

1) It depends on the lender. Back when I was a loan officer, we could count 70% of the rent towards qualifying income. Now-a-days it might be less and I would imagine it could vary from lender to lender. So if you bought a duplex and lived in one side and the other had an existing tenant at $1,000 a month, we would have counted $700 towards your qualifying income. 

2) 2% Rule, search the forums. Some people seem to swear by it and others say it isn't possible in their market. I will let others chime in here. 

3) Put the info into the BP deal analyzer and then decide if you think it is a good deal. To me at first glance I have to say there isn't enough info for me to make a solid decision but by gut says not it isn't one that I would be interested in. Gross rents show $1,800 and your PITI is $1,500 - that only leaves $300 bucks for profit, maintenance and future capx.

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