Looking at my first deal possible duplex fix and hold

3 Replies

Hey all BP members!! I have this potential deal that I would love to close. This house is on the same block as me. Located in Staten Island, New York. Im waiting to hear back from the owner I just left him a voicemail right before I wrote this. 

The info came to me from my aunt. Who I should mention rents the top half for $1200 a month. The house was owned by a old couple who passed away last year. The son and siblings inherited the property. The son recently told my aunt that he's looking to put it on the market soon. The house is a 6 over 6 and was built in 1960, the estimate on Zillow is $530,000. I know NY prices are insane. The bottom half would include driveway, basement and backyard and could probably rent for $2,200. As of right now the bottom half is currently vacant.

My aunt called me and told me right away because she knows I have been educating myself in REI. A little about myself, I recently formed a general contracting company fully licensed and insured in NY.

Again I'm not that experienced in REI but I feel that this can be a good deal, my aunt wouldn't have to move and I would acquire a rental property. My plan was to fix it up and force equity and keep it as a rental under my business name. Im also looking to buy my own house in the next year. Im getting married next year and would like to buy my own house unrelated to this one. With that I thought it would be a good idea to see if I can acquire this property under my business name. This way I could get a business 203k loan to buy the house and fix it up. Then refinance after all the work is done and I have the house fully occupied (aunt upstairs and new tenant downstairs). Plus I would be doing most of the work myself so I will save a ton on labor.

Can some one please tell me if I'm on to something here? 

Id be happy to hear anyone's advice on how I could possible make this work.

If any more details are needed let me know.

I have some comments on the financing aspect. From what you have described, you might be able to get some seller financing. This will reduce equity out of your pocket and increase your return. Providing deal is good in all other aspects and your owner financing terms are good. 

I may be wrong, but I'm fairly certain that you cannot get a "business" 203k loan. 203k loans are owner occupied first time home buyer loans. They're strictly governed so that businesses/investors don't use them, since they provide a lot of assistance to first time home buyer types. You also cannot transfer ownership to a business entity with these mortgages (or many other conventional owner occupied mortgages in general).

This deal obviously relies mostly on what you can get it for, what you think market rent is, and how much you will need to pay each month for your mortgage payment. 203k monthly payments tend to be high, since you're allowed to put down as little as 3.5% of the purchase price + you need to pay PMI + you are financing the construction cost as well. You will need to sufficient W2 financials to show the bank that you're able to afford the payments.

Also, another thing to point out is you cannot do the work yourself on a 203k. You may be able to do it on a streamlined 203k, but I don't believe that's allowed either. You need an approved, licensed, bonded, and insured general contractor to sign off on the work and provide a detail estimate of what needs to be done. 

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