Rental Property Investor · Jacksonville, FL · Member since 2015 · 342 posts · 142 votes
Current numbers
- Annual Taxes: $2,007
- Unit 1 ($500)
- Unit 2 ($500)
- Unit 3 (currently vacant)--but i'll add $500 to the total for anticipation of gaining a future tenant
- House ($750)
total: $2250
- Ask price: $215,000(from $235K)
I'll probably have to house hack(via VA Loan) and move into the house. It's an older house but will have to be updated to my standards. The 3 units in the back are 1/1 with the 'possibility' of adding another 1/1 unit totaling 4 units. The neighborhood is a C+ and I only plan on living in the house for a year then moving out.
After running the numbers(10% each for vacancies, repairs and cap ex), it doesn't cash flows and is -$80.79.
Ideally, I want to raise the rents at some point i want to:
1 Update the house so I can get more rent
2. Add another 1/1 unit
3. Raise the rent to market levels ($550)
I see the potential but am a little afraid to make the leap. Any ideas or suggestions would help as they are expecting a decision from me Today!
Rental Property Investor · York, PA · Member since 2017 · 377 posts · 315 votes
9y
@Mitchlyn D. - the way I look at it: how often will you find a house where your mortgage payment is only $80.79 per month? (My math showed -$122 for cash flow, but close enough).
After a year, you'll add another $500 per month to your cash flow (assuming you rent the house for super cheap) - even if you don't raise the rent in the other units, you will be able to turn this into a positive cash flow in a year.
Kudos on considering vacancy, maintenance, and CapEx. Don't forget property management though!
My advice: Make an offer of $200k (example number) and then add in a renovation loan for $50k to improve the properties (again, just an example number). This will raise your mortgage payment, but will allow you to (a) fix up the house, and (b) increase rent. Yes, your mortgage will be roughly $200 more a month, but again: where will you get a mortgage for $322 per month?
Real Estate Broker · Watertown, NY · Member since 2016 · 1k+ posts · 1k+ votes
9y
How's the neighborhood? Are you buying the best house in a bad neighborhood? Worst house in a good neighborhood? or is it in the middle? How much do you expect the house to appreciate after you've put work into it?
I ask these because if you answered yes to the first or 3rd question then I'd probably look elsewhere. You can't change your neighbors. You run a big risk of running into negative cash flow with one bad tenant. Bad neighborhoods often attract sketchy tenants (but you can mitigate this by really doing your homework at the application process). Tread carefully. 5 units should be bringing you much better cash flow.
Rental Property Investor · Jacksonville, FL · Member since 2015 · 342 posts · 142 votes
9y
@Account Closed - The neighborhood is like a C+. It was a rough area in the past but is now an alright neighborhood. I drove by there at night and day frequently and it seems rather quiet.
However, I'm not sure how much it will appreciate. My realtor says it's a good deal based on the rental income but i'm playing it safe. So the property has a single family detached house but the triplex is in the back. With a 'potential' of adding another. So in the future, if I can rent each unit out for $500 and the house for $900, it would be a good deal.