Finally Ready - Help me analyze please!

10 Replies

  1. Duplex Homepath Property: 20 day look. on the 18th day.
  2. Listing Price 99,900
  3. Offering: 96,000 (hopefully they will accept)
  4. Renovation: 10,000 or lower. Contractor looking at property this week.
  5. After rent in the area: $800
  6. Taxes: $2,900
  7. Mortgage: Healthy Neighborhood Renovation Loan  
  8. $96,000 + $10,000 (renovation) .
  9. Closing cost: $7, 266.  (including taxes, title , insurance... etc.)
  10. NO PMI (special program) and only 3% down.
  11. 4% interest on conventional loan/6% interest on renovation loan until converted to conventional loan.  Interest payments only during renovation.
  12. Mortgage Payment: $961.  If I wrap the interest payment and points in the mortgage the total loan would be $118, 381. Which is an option per the lender.

  Cash at closing needed: Only $3,180.  The offer would include asking homepath to pay 3% of closing cost.  I already have my certificate for the required training course.

  1. Owner occupant... I will stay in one unit, but have a roommate paying $300-400 per month for a year and rent the second apartment for $825.
  2. What would be your opinion on this deal?  If you need more info please ask.  I'm a newbie!

@Kimberly H.

What is the term on your loan?

You are going to need to save up another $3-4k for the refinance charges when you convert to a conventional loan.  You might want to ask if you can get a significantly reduced refi charge if you use the same bank again.

As numbers go, it is a solid house hack.  Have you run the analysis on the property when you move out and rent both sides?  You also need to clarify your investment criteria for properties.  My investment criteria is 15% Cash on Cash return AND $125/door/month cash flow.  Make sure this place meets your criteria AFTER you move out.

Term.... 30 year conventional.  Reno wrapped in conventional at closing.  Just 6% interest during the renovation payments.  Then conventional kicks in at 4%.  No additional charges or closing after renovation.

I like your criteria.  I was thinking more on the lines of $100 a unit.. but this will exceed that when I move out after a year. How do you compute the cash on cash return percentage. 

@Kimberly H.

Cash on Cash is:

Yearly Cash Flow / Total Cost of Acquisition

I arrive at Cash flow using the following expenses and incomes: (numbers are from another deal I was analyzing.

Mortgage Rate 5.00%

Length of Mortgage in years 30

Monthly Mortgage payment $362.35

Taxes $200.00

Sewer and Water $66.67

Trash $75.00

Heat/Utilities $-

HOA $-

Cap Ex and Ops $350.00

Insurance $300.00

Mgmt Fee $180.00

Vacancy $145.80

Total Expenses $1,679.82

Unit 1 $450.00

Unit 2 $450.00

Unit 3 $450.00

Unit 4 $450.00

Unit 5 $-

Unit 6 $-

Total Revenue $1,800.00

Cashflow/month $120.18

Cashflow/year $1,442.14

Cash on Cash Return 5.44%

@Aaron Montague

 You are so right.  I have two closing.  The renovation loan is a balloon loan for max 12 months interest only.  Then I close again on the complete loan and yes two closing and 2 closing costs. I end up bidding over asking.  by $10K. The numbers still work, but the cap rate is less of course.

I'm currently under contract with a Homepath duplex in Baltimore, MD.

I also found out that rent for the area is between $800-1300.  So I have a little flexibility. The duplux is very nice.  Each one is 1300 sf.  3 bedroom.

@Kimberly H.

That is a wide range for rents.  Make sure you figure out how to get the maximum rent for the minimum investment.  This is another "run the numbers" scenario.  If you can get $1150 for fresh paint and a clean place it may be a better solution than shooting for $1300 if it is going to require stainless, granite and glassed in showers.

Enjoy the process either way.  Can't wait to hear about the next one!

Interesting I didn't see and ARV maybe I missed it. Looks ok. If it closes. You might want to rinse and repeat. You don't have to go Homepath again. Maybe FHA. Look at the owner occ requirements of whats out there. Having them in approximately the same area helps you can manage them yourself. Over the years you do that a few more times that could be a nice retirement.

The numbers are really reasonable rehab to perm there might be a fee to convert to perm shouldn't be too bad.  The thing about Dup's is you have to keep up with it.  The more occupants the more wear and tear.  Another thing about dup's is where the location is.  If its in the city Booya, keep at it.  

Congrats @Kimberly H. ! The numbers look like you are under contract for a good deal.  Does your loan have a minimum time you need to stay in the home? 

You're required to be an owner occupant for 12 months with Homepaths.

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