Owner Occupied Double

13 Replies

Hi guys I am purchasing my first home and want to know if this would be a good deal.  

I am approved for a FHA loan, I found a double that I like. It is an all brick double that was built in the 50's. It has central air, updated bathrooms, updated kitchens, newer appliances, etc.

The only problem is the asking price is 125,000 and the most I could get for rent in this area of town is probably $600-$650.

my rate on the loan is only 3.75%, taxes are only $3000 a year.  I know when I move out I wont make huge amounts of money every month but it should bring in something.

I am stuck and dont know how I should proceed. I guess I can lowball an offer where I try to get it for under 100,000. What are your thoughts.

Hi @Richard Grubb what is a double... sorry just not familiar. Any chance this part of town is improving. new stores opening or closing... any fun restaurants or markets. remember you can make money with the paydown of the loan, appreciation, and rental income or any combination. principle and interest on the full $125k (or no moneys down) is $579/mo plus $250 tax per month and $100 /mo plus or minus on insurance.. so at $929/mo ... plus then you have all the other costs of property ownership +++. But if a double is a duplex and you plan on living in the other half then this seems to make more cents and sense If the rent on one side is $600. so maybe help us out with a little more info on how much down you plan for and if this is a duplex and what the rent is for one side if a duplex. Kitchens... guess that implies a duplex...

@Richard Grubb is this your first property??  you are basically meeting the 1% rule... very rough guideline monthly rents equal 1% or more of total cost so 1200 is 1% of 120,000 (assuming it doesn't need many repairs) ... any public transportation around you.  and you are going to live there also??   can you see any ways to increase value to your tenant... do they have covered parking and or storage.... remember if you can get some storage for a tenant then you save them $60-100 per month..so you can bump up the rents... if you are close to a bus you can save them moneys.  if you think it is up and coming then you may be able to get appreciation also.. all good ... how has appreciation been in that area ( look at zillow for appreciation and rents)... you could live in the cheaper unit and get the tenant to pay the higher rent...  if you live there your rent will probably be lower than where you are now... saves you money... if you get 3.5% appreciation a year you will double your cash investment every year.  could you live there and be safe and happy?? 

when you go on zillow does is say the rents in that area are $600 ish... sometimes zillow can't figure out that there are 2 rentals .. so maybe look around at similar sized ones to use. You also could go use the calculator in tools.. you only get a few shots at it though... but the way I see this is you put down $4200.. its in an up and coming area you say. If the tenant quit paying 2 months into the lease could you make the whole payment for 6 months..

Zillow says rent is $750. I don't know if I can get 750 but somewhere between 600-700 probably is more acurate. Also I am only purchasing a house I can afford to pay on my own and not relying on having a renter. That to me is a bonus. It's my first property. There is currently a tenant there. She has been there for 14 years but is currently only paying $510 a month. I know if I leave it at that she won't move out. If I raise the rent she may move out so there is another though for myself as well.  What are your thoughts on living there and having a guaranteed income even if it's below market rates. 

im sorry zillow says $825 and I do not think that is 100% accurate.  Who knows to the right person at the right time maybe.  but somewhere between $600-$700 is where is would put average rent in the area at.  Maybe $725 if you push it.  Again its my first property and I do plan on living there for a little while.  The house needs nothing really, maybe some new carpet but it is move in ready.

start the conversation... don't know where it will go.  try to have backup for "why" on the low ball. it all sound pretty good and you get low rents. the first is more gut wrenching.

The area is on the outskirts of a hot area of town but this area is more up and coming. It's more a buyers market. House has been on the market for 6 months and had no offers. That's part of the reason for the low ball offer. Also current tenant pays low rent which would be my second reason for low offer. I'm sure there will be a counter offer so start low and see where it goes is my thoughts on it.