First time Investor Duplex Question
Hi there, I'm new to real estate investing and would like some advice. Ever since we learned about house hacking, my husband and I have decided that's the route we'd like to take. We've found a duplex and plan to live in one unit while renting out the other. We made an offer on the duplex, which was accepted, and are now in the the due diligence phase.
The house is older and needs some work, so we are getting an FHA 203k loan to renovate the kitchens and bathrooms in each unit. As we've begun the loan process, the numbers have come back higher than I initially anticipated before making the offer. With the new numbers, the cap rate will only be about 6% according to the BP calculator with a positive cash flow of about $158/mo.
The big upside to the property is that it is in an already popular neighborhood with a huge chance for appreciation, as the continuation of a popular walking path will be coming into the neighborhood along with two planned shopping centers, walkable restaurants and a new park. These will all be walking distance from the property.
My hope would be that the chance for appreciation would be enough to make the lower numbers make sense, especially seeing how property values have risen in the surrounding neighborhoods where the walking path is already completed.
My question is, is it worth the gamble to solely rely on future appreciation to make the deal make sense? Are these numbers good enough to make it work, or is this too risky, despite the hopeful future appreciation and the chance to raise rents in the future?