Analysis Paralysis or Not?

Question

Been looking for a duplex near my new job so I can get into the investment game and bring down my monthly out of pocket expenses. I found one that is basically move-in ready and has a tenant in one side which is perfect for my situation. However, I'm afraid that because I'll probably pay close to full price and it's in flood zone (zone A) that in the future this may really eat into my profits. I do feel confident I can raise the rent almost immediately for the other side though that may cause a vacancy for some time.

When i run the numbers I feel like its not a great deal, but I probably wouldn't lose much and over time would likely do fine. Yet, I don't want to start with a bad deal and ruin my ability to keep moving forward.

It also fits my current situation nicely and will get me living closer to my job. I own a single family home 2 hours away from that area. I would love to rent it but may be difficult to cash flow. I suppose I could try it for 1 lease and see how it goes.

I think I have this problem that I think everything is a permanent decision and that may not be the case, I could always reverse course or change my mind... I also think maybe it's just better I do SOMETHING and get going even if maybe it turns out to be somewhat of a mistake.

Am I over analyzing or am I being wise here? Anyone go through anything similar?

Moises R Cosme · Answer

George, At first glance those numbers look pretty good, particularly for your house.  You have $60k in equity, your mortgage payment is $1450 and you think you can get $1800/month for rent - that's a really good asset.  With singles, I am okay if I get $200/ month in profit.

You are probably not going to be able to do a 5% down program, because you own your first property.  The total all in mortgage payment for the duplex is probably going to be around $1400 & you are going to get $800 in rent.  Combine the rent from renting your house and the tenant at and you are basically living in your unit for a couple of hundred dollars per month and you save yourself a two hour commute.I do NOT like paying full list price, but based on your set of circumstances I think that I would buy the duplex...

Moises R Cosme · Answer

George,

What are the numbers?  How much are you paying for the house?  How much is the total 'all in' mortgage payment?  How much do you expect to get for rent?  Best way to get a response to your question is to put out the objective parts of the deal.  Analyzing the subjective factors is impossible because we do not walk in your shoes.

Post the numbers & I will give you my opinion.

George Doran III · Answer

Thanks for the advice!

George Doran III · Answer

Okay thanks for the reply!! I wasn't really sure of the etiquette in the forums of giving all the numbers but good to know that it's okay. So basically...

The duplex is 149,000 list. Currently receives 650 from rented side, renter says the other unit paid 750. So 1400/mo.

Quote for Flood insurance was 2200/yr if 20% down. I was hoping to use owner occupancy to get a low money down loan, like 5% conventional or something of that nature, so not sure how much would raise the flood insurance.

Other rentals in that area/school district (2bed/1bath each side) definitely go for at least 800+ so I think I definitely could up it. I plan to live there for a little while maybe 1-3 years. So I would save initially doing most things myself. 1 bedroom in each side is very large and may be able to split into 2 to make each side 3/1.

Mortgage would be roughly 900-950/month if 5% down 722/mo with 20% (including taxes/insurance etc)

To me it really doesnt look like a good deal... However, it is better than what im doing now just paying my own mortgage. Still, I dont want to start on the wrong foot. Also, I'm trying to move to that area, so in my situation it is a fit for that.

My current home i have about 60-70K in equity and I pay 1450/mo and could probably only rent for 1800-2K/mo. I'd like to hold on to it but after expenses it probably wont cash flow for years.

I hope that helps! Thank you!!!