How to run numbers on Duplex or SFH - BRRRR - Charlotte NC

3 Replies

Hello BP community,

My current situation is, I own a condo in a popular area in South Charlotte NC, my mortgage is $900/month, HoA $200, and rents for similar condo's are going for $1300-$1400. We have no debt and about $10k saved up. My fiancé and I are looking to buy a SFH or preferable a duplex in or around the south charlotte area and rent our condo out. Looking to BRRRR our new place so I want to buy a livable fixer-upper, stay for a yearish, then continue. My question is, what tools should I use to run numbers on a house, or duplex? Since I will eventually want to rent our future house out, how do I know where a good area is to buy that will be good to rent? Duplex's are around from $500k-ish in Charlotte areas we would like to live. Can you still find a deal? How do you find or know a deal is worth it? Do you think it will be worth it in long run to buy a duplex for say $500k if mortgage is $2,500/month, and rent is $1,500/side (so after one year when I move out and rent other side it would be cash flow positive).

Also, can you get a mortgage on a duplex for around 5% down if you plan on living in one side of it? If so where?

Anyone use a wholesaler on their first deal?

Any input or tips are appreciated.

First things first, @Stephen Foltin . Take a cold hard look at whether your condo will actually make a good rental. Starting with cash flow mortgage (which I assume includes taxes and insurance) and HOA leave you with a max of $300/month to cover vacancy, repairs, CapEx, and management. It's highly unlikely this will cash flow much if anything. You have the added risk of a special assessment coming along and wiping out months or years of cash flow. Have you looked into the condo rules about renting? Many only allow a certain percentage of units to be rented and/or only for 1 or 2 years.

Next how much is the condo worth and how much equity do you have? You need to determine what your Return on Equity (ROE) will be and if your money will be working hard enough for you.

Regarding the duplex:

  • The overall numbers still look dismal as a pure investment property. You're not coming close to the 1% rule. Perhaps it's worth considering to lower your living expenses, build equity, and gain land lording experience, but don't delude yourself into thinking you're going to making money each month after you move out.
  • Wholesalers are definitely an option, but know that they usually focus on distressed properties, prefer that you buy cash, aren't going to be willing to pay agent commissions, and will expect to make a fee. That being said, worth exploring.
  • Yes, you can absolutely do a low-down payment loan as long as you plan to owner occupy.

Have you considered 3 or 4-unit properties? How about something like this, this, or this?

@Stephen Foltin

Jason is right. $300, at best, to account for vacancy, CapEx, repairs, etc. is far too slim to create a cash flowing property. You could rent the condo and potentially break even in hopes for future appreciation or you could sell it and use the money for a future investment. You could also keep it and use it as a line of credit depending on how much equity you have.

Duplexes in Charlotte are extremely rare. When they do pop up, they are often in very rough condition and overpriced. There are plenty of SFH's in South Charlotte that will cash flow.

You can definitely get a 5% down loan on a duplex or SFH as long as it is owner occupied for 1 year. Almost any lender will give you that. You could even get a 3% or 3.5% down loan.

I would consider saving up a little more than $10k at your expense before you purchase your next property- especially if you decide to keep the condo. A down payment, closing costs, immediate repairs, or a low appraisal could eat up the majority of that $10k right off the bat.

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