Rental Property Investor · Central New York · Member since 2020 · 17 posts · 3 votes
I've been looking at buying my first investment property-a duplex in Upstate NY using a loan from my employer retirement fund. The numbers look good with a cash flow of about $200/month from the current tenants. Mortgage rates are looking great but I'm obviously concerned over the pending recession from the COVID-19. Thoughts?
Rental Property Investor · Finger Lakes, NY · Member since 2018 · 35 posts · 36 votes
6y
I just closed on my duplex Monday (3/16) and that was a weird moment in my life. I one current tenant and a future tenant that is in healthcare moving in next month. If you don't take a risk you'll never get the reward, but @michaeldurham says above we could be heading into a depression. And even then people will still need a place to live though as their homes are foreclosed on.
Just make sure the numbers work. I bought the BP membership, used the software and saved myself from making a mistake on several properties until I finally found one that cash flows. Minimum $200 / month, likely $400 / month.
Specialist · Plano, TX · Member since 2020 · 2k+ posts · 861 votes
6y
@Scott Raynor if the numbers look good and the deal would be profitable go for it. This situation is only temporary. Be sure to follow CDC's guidelines for safely buying and selling homes during the pandemic.
Rental Property Investor · Killeen, TX · Member since 2017 · 337 posts · 100 votes
6y
@Scott Raynor are your fears about the virus affecting the real estate market? or about your health?
For the first question, if you're not over-leveraged (sounds like you're putting a downpayment) then you would be able to weather a downturn on the market. As @Marlen Weber is saying, this is only temporary. China and Korea are already recovering.
For the second question, there are ways to go along with the purchase without much human contact. You can also do things to decrease the likelihood of you contracting the virus. Again, refer to the CDC site.
Bottom line is how badly do you want to achieve your goals?
Anyway, I hope this helps! I wish you the best in your investing journey! Stay safe out there!
Peoria, IL · Member since 2013 · 967 posts · 383 votes
6y
Originally posted by @Account Closed:
For $200 NO way San Jose.
i agree with Gina! Taking loans on retirement can go south. your deal economy goes south. your income gets cut off. then the next year you might owe irs money on loan you couldn't pay back. it's counted as income & penalized! So now u owe IRS money & you couldn't pay the loan money. hmmm no money to pay money = penalties & owing more money.
Real Estate Entrepreneur / Investor · Chicago, IL · Member since 2016 · 688 posts · 367 votes
6y
As Long as your not overpaying for it. Your ok. Buying rental properties, your main goal is to get the most cash flow you can. The questions you should be asking. What's the cash on cash return and or CAP rate. If it cash flows. Just like any business. It's a good thing. The value of the homes may go soon but that shouldn't matter. Cash flow. Cash flow. Cash flow.
There are some other factors if you want to get technical like neighborhood, schools, types of tenants, the local job market. Etc...but the cash flow is one of the top 3 things you should be focusing on. If your new I wouldn’t recommend going into the rougher neighborhoods just because you can get section 8 and it pays more. There are trade offs with section 8 and that varies not just by the city your investing in but it’s neighborhood and the block and it’s radius your looking to buy.
Lastly, did you also factor in garbage and water? Landlord has to usually pay those as well. I personally would find another way to do the deal instead of doing it that way.
Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
6y
@Scott Raynor would tenants be a and b tenants or are they c tenants? I think if your lender is good with your debt service coverage ratio, then you should be ok. Also - what is your broker saying? Is your broker trustworthy?
Rental Property Investor · Finger Lakes, NY · Member since 2018 · 35 posts · 36 votes
6y
I just closed on my duplex Monday (3/16) and that was a weird moment in my life. I one current tenant and a future tenant that is in healthcare moving in next month. If you don't take a risk you'll never get the reward, but @michaeldurham says above we could be heading into a depression. And even then people will still need a place to live though as their homes are foreclosed on.
Just make sure the numbers work. I bought the BP membership, used the software and saved myself from making a mistake on several properties until I finally found one that cash flows. Minimum $200 / month, likely $400 / month.
Rental Property Investor · Central New York · Member since 2020 · 17 posts · 3 votes
6y
Thanks so much everyone for the amazing feedback! This was my first time posting in the BP forum and I'm so happy I did!!
Alex, the property is in a good area with good schools and plenty of shopping near by. With my limited experience, I'd consider it a B property. I've been communicating with the seller's agent thus far.
@Maryanne Cameron, thanks for the recommendation on the BP software. I'm terrified of missing something in the math! It also looks like you're not too far from me either. I'm in Central NY. Good to see others making a go of rentals in this area!
Anyone have any recommendations for financing besides borrowing from my employer sponsored retirement account? Do I definitely need to come up with 20%??
I'm also considering house hacking and living in one of the units myself as I know that'll lower the down payment since I'd be considered a first time home buyer.
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
6y
@Scott Raynor for $200/month cash flow, I would probably say no. Those numbers just seem very thin, especially for your first deal. Does that number include healthy reserves for repairs and capex? What about a management fee? Is there upside to grow rents through unit renovations or simply non-aggressive seller that never raised rents to market?
When talking about a house hack, that changes things, as a duplex will almost never cash flow without both units rented. But if you are out of pocket less by owning the duplex and living in half versus renting both and renting an apartment for yourself, then still makes sense.
Where in upstate are you looking to buy? You can add an addendum to you contract to add in Coronavirus related issues to give you more time and other ways to close. Hope all is going well and if you need any other help feel free to reach out.
Rental Property Investor · Central New York · Member since 2020 · 17 posts · 3 votes
6y
@David Kiszka thanks so much for the feedback! I’m in the Syracuse area. My biggest concern right now is getting the math right so it will cash flow. I don’t have mls access. Maybe I should just bite the bullet and contact a realtor? Right now the selling agent is giving me $2500 off the price if I don’t. Should I be concerned?
Rental Property Investor · Central New York · Member since 2020 · 17 posts · 3 votes
6y
Hi Chris,
No, it's not section 8 or government housing. It's a B property if I understand the way to evaluate rentals with that system. I'm actually now seriously considering house hacking and living in one of the units for at least a year.
Newark, DE · Member since 2020 · 19 posts · 14 votes
6y
Originally posted by @Alex Olson:What is a, b or c tenant please?
@Scott Raynor would tenants be a and b tenants or are they c tenants? I think if your lender is good with your debt service coverage ratio, then you should be ok. Also - what is your broker saying? Is your broker trustworthy?
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
6y
Those numbers sound tight to me. Only a $200/month cash flow for a duplex can disappear in the blink of an eye. I haven't bought a duplex in years, but I wouldn't touch anything with less than $500/month cash flow