Am I in over my head buying this home?

9 Replies

I have 1 duplex that we rent both units out and have about $300 in cash-flow until we pay of a loan we got for the down payment from my father in law. We should have that paid off in 3 1/2 years. After that we will cash-flow about $800 a month... ($65,000 in equity)

The second duplex we live in half of it and so we break even. If we move out we will cashflow $900. ($100,00 in equity)

We are looking at buying a house but because of the rentals we can't qualify conventionally for this 3rd home but we are doing a seller finance with little down so we have a higher interest rate and not as good of deal on the property. ($1,700 dollar payment) 

DO I DO IT? If the market drops here in SLC it'll hurt bad on this deal because we don't have wiggle room... 

Yea our DTI is too high according to the bank. Also I have self employment income and 2013 income wasn't high because that was my first year as a realtor and 2014 was 70k but because they take the average I would have to wait until next year to qualify conventionally

@David Wiser how long have you owned both of your duplexes?  Once they show consistent income (two years)  most lenders should look at it no different then the money you make at work. 

Did you shop around with lenders?  I recommend speaking with other local investors to see who they use.  

Originally posted by @David Wiser :

  If the market drops here in SLC it'll hurt bad on this deal because we don't have wiggle room... 

 Exactly how will your wiggle room be impacted?

Investement #1 that we live in we have owned for 3 years and lived in half so that income doesn't reflect what it will bring in and investment #2 we bought Jan of 2014 (last year) so its only on one tax return so that cant use our highest ROI property... Plus we would need to have more reserves and a bigger down payment then we have if we did go conventionally...

We are putting 0% down on this 3rd place... with a interest at 5.5% and a purchase of $268,000 which is a fair deal but in the past I've bought rehab homes and remodeled them and kept them that's how we have so much cash flow on them. This one we are buying at Market Value so we are so dependent on market  that it is scary if the market drops... You know? 

We make enough to make our payments  and the rental incomes cover most of it anyway but if our rentals didn't rent we coudn't cover all the mortgage payments very long.

Looks like too challenging from my point of view. I would go with one more 2 plx or 4 plx as it will be more reasonable from cashflow point of view

It could work but I agree with Jane.  Really think about this hard.  

Now if you had 6 to 8 months of mortgage payments in the bank then it might be worth considering.

You have to go through the what if scenarios.  If one side of your duplex goes unrented for 2 months and the other does the same how will you be financially?

Could you afford to lose it all foreclose and start all over?

It seems like a very big risk to me.
You might consider waiting another year and trying to do another loan.

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