Rental Property Investor · San Antonio, TX · Member since 2017 · 14 posts · 3 votes
I recently purchased my first duplex. I was so eager to get my first property I convinced myself that I just needed to get started regardless of it not cashflowing (terrible mistake). Currently the rent will cover the mortgage but that’s it. I’m coming out of pocket 700$ every month to cover reserves for vacancy, repairs, capex, etc. In order to make this property cashflow I would need to do about $15,000 in repairs to get higher rents and refinance the property at 40% equity ($90,000). I am extremely frugal so the $700 really doesn’t affect my way of living. Should I devote all my money towards making the property cashflow or use the experience gained from my first failure to buy and rehab another duplex that is under market has the ability to force equity and will cashflow? Both would take about the same amount of time and money.
Rental Property Investor · MN · Member since 2017 · 864 posts · 555 votes
7y
Hey @Zackary Martin how confident are you that the rents will be that much higher by sticking just $15k into it? I commend you on taking action but also learning from the actions.
Unless you are positive that it will cash flow after (cash flow well at that) I would get rid of it. Get an asset and sell off the liability
Rental Property Investor · MN · Member since 2017 · 864 posts · 555 votes
7y
Hey @Zackary Martin how confident are you that the rents will be that much higher by sticking just $15k into it? I commend you on taking action but also learning from the actions.
Unless you are positive that it will cash flow after (cash flow well at that) I would get rid of it. Get an asset and sell off the liability
Rental Property Investor · San Antonio, TX · Member since 2017 · 14 posts · 3 votes
7y
@Jake Stuttgen only one side needs to be rehabbed which is why it’s such a low rehab cost. But there are other duplexes on the same street that are smaller and not as nice but are still getting the rents I’d want. I can’t sell the property because I wouldn’t get enough to pay off the loan after the agents commission and closing cost.
Investor · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
7y
To look at it a different way, you’re spending $700/mo on a property to rent to someone else. Doesn’t sound like a great investment to me.
If you can get the rent price up, I would definitely do that. You’re not only increasing your cash flow, but you’re also forcing appreciation if you can do some of the work yourself or get it done for under market rates. That could definitely improve your investment.
@Jake Stuttgen only one side needs to be rehabbed which is why it’s such a low rehab cost. But there are other duplexes on the same street that are smaller and not as nice but are still getting the rents I’d want. I can’t sell the property because I wouldn’t get enough to pay off the loan after the agents commission and closing cost.
For clarification, do you currently have both sides rented or just one? How much are you collecting?
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
7y
Sell this property, take whatever you get out of it in cash, even if it's less than what you put in it (don't get emotionally attached to the money), and do it right with the nest one. Keeping this one is holding you back...get rid of it.
Rental Property Investor · San Antonio, TX · Member since 2017 · 14 posts · 3 votes
7y
@Joe Villeneuve I’m living in one side. The side that would be rehabbed is currently rented by tenants who have been there for 7 years. Fully renovated I believe both sides could pull 1,100 based on the other duplexes in the neighborhood.
Rental Property Investor · San Jose, CA · Member since 2018 · 152 posts · 159 votes
7y
@Zackary Martin like Jake said, congrats for taking action. You learn and become successful by getting out there, taking action and making mistakes.
Since you’re house hacking it, I would likely just keep it, since you already need a place to live.
House hacking isn’t all about cash flow. If you’ve got half the mortgage you would’ve with a regular home, you are doing alright. If you live there a couple of years you will at least get loan pay down which is awesome.
I would slowly DIY renovate the side you are living in while you are there. Then, when you move out you can get higher rents for that side. Likely making that whole place cash flow positive, and with less loan to pay down.
@Joe Villeneuve I’m living in one side. The side that would be rehabbed is currently rented by tenants who have been there for 7 years. Fully renovated I believe both sides could pull 1,100 based on the other duplexes in the neighborhood.
So find another duplex to Hack...one that doesn't take money out of your hands. One where you're not paying the tenant on the other side to live in your property.
Contractor · Oxford, MA · Member since 2018 · 807 posts · 745 votes
7y
@Zackary Martin at this point it is all math. How much will it cost to get your money back? If it's only the 2 years it looks like, do it! Obviously selling and taking a hit at this point isn't worth the losses if they can be mitigated by a $15k investment. Chances are you would lose $15k by selling anyways and I would much rather spend $15k to have an investment that breaks even and will get me money later than $15k for nothing. So if it was me, I would get that rehab done, get it rented at market rate to hopefully turn a profit or break even and then move on to acquiring another one.
Rental Property Investor · Austin, TX · Member since 2011 · 30 posts · 5 votes
7y
@Zackary Martin , would have been nice to offer the tenant the place you are currently living , you move to theirs, rehab it while you living in , and get out after a year and raised the rent.
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
7y
If you can sustain current investment and trying to get most of it consider you have accomplished a lot.
While Feds claim there is no signs of recession, talk to people in the trade they will tell you price maxed out 1-2 years ago. Feds said the same just before every past recessions.
Contractor · Oxford, MA · Member since 2018 · 807 posts · 745 votes
7y
@Sam Shueh the government will never tell anyone bad things are coming, but if people cant read between the lines it is their own fault. They say "best economy ever" while saying any downturn domestically or globally will give them reason for a rate cut. They also stopped selling off their debt and said they might start buying again soon. These are things they do right before a recession (not the buying, that was a "once in a lifetime" event that they recently said is now the new norm to manipulate the market and they have been very unsuccessful doing so unless the goal was to saddle the tax payers with more debt and give it to bankers)