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Daniel Winsor
  • Rental Property Investor
  • FL
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36
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Whole Process - First Multifamily - 2 Unit in Key West, FL

Daniel Winsor
  • Rental Property Investor
  • FL
Posted Aug 1 2018, 15:45

Still learning, so I figured it would be good to keep some running updates on my progress with this!

This is my first purchase after getting involved with BP. I had purchased a SFH when I lived in CA because I "fell in love" with the house. It turned out to be an ok purchase and is currently cash flowing about $250.

It’s going to be a house hack for the time I spend in Key West, FL unless something big changes.

Basics of the Property:

Purchase Price - $550,000

Estimated Repair Budget - $5000 (Not really any work needing to be done, but want to plan on SOME money for things like paint or small patchings just in case)

ARV - $575,000

Taxes - $5000

Purchase Plan:

Purchased with personal money, a small gift, and a TSP loan on a VA loan. Not keen on where the other money is coming from, but I couldn't stockpile money fast enough to make it happen. TSP loan is only $25k @ 3.25%, so I plan to pay this aggressively immediately. VA loan availability was limited to $288k, so I am having to put about 8% of price down.

Unit Breakdown:

  • 1st unit - 1 bed/1 bath - about 600 sq ft - planned owner occupancy (opportunity cost rent about $2000 - I would spend at LEAST this much living elsewhere in a 1/1)
  • 2nd unit - 3 bed/2 bath - about 1200 sq ft - planned yearly rental - $3000-3400 a month

How I Located the Deal:

I knew I was getting moved to Key West and, VERY fortunately, I was going to be out that way for work about 6 weeks before I was set to move. I emailed a couple agents and found one I liked based on response time, experience, things he said, etc. Viewed a couple properties on my work trip. He brought up this duplex; said the owner’s husband had died and she might be interested in leaving town (he is friendly with her). Didn’t have the property on the market, but maybe with the right offer, it would motivate her. He recommended $525k and we were unable to view the property on this trip.

After arriving for the actual move, I was able to view this duplex as well as a few others in the area. Nothing else caught my eye like this one. It’s price per square foot is almost half other things I was looking at. After two viewings where I could see both units and a chance to meet the owner, I was told she wanted to put it on the market for $575k. Agent had a market analysis that said $546k. In my limited experience with RE and the area, I felt this was extremely low and could have seen the place going for $600k+ if she waited for the busy season. I had initially said $525k was my absolute high end, then pushed that up to $550k. I was being crazy and considering being willing to go for $575k, but I absolutely couldn’t go any higher than that.

Agent told me a couple days after my second viewing that she wasn’t overly interested in going to market, and wanted to work with me. He recommended an initial offering of $540k, she countered at $550k with language from my agent saying it was “as low as she could go”. I am atrocious at negotiations (something I know I’ll need to get better at in this business for sure) and said “lets do it”. Received the signed purchase contract today.

I was initially looking at houses for $400k+, so I am a little shocked to find myself about to buy at $550k. Things that got me to this point:

  1. It’s a duplex. I found a few cheaper, but less rentable, tiny, or extreme disrepair scared me off. Being able to rent a 3/2 for the price of the mortgage payment means I am essentially living in a very high cost of living area for about $200 a month - considering I am given $2900 a month for living expenses, I am taking home a hefty profit that doesn’t show up on cash flow sheets.
  2. This is a place I will be living and hopefully starting a family in, so I liked the possibility of going from a 1/1 to a 3/2 if I needed the option.
  3. Time crunch. This is a minor factor. I’m living in a hotel room at $2250 with my things in storage for $250. This is close to what I would be paying for a 1/1 with utilities, so I am ok with it for now. That said, I don’t want to spend 6+ months in a hotel. Also, busy season is Winter. Many rentals only last for 9 months at which point the rates are jacked up to almost double.
  4. Comparisons. A quick look shows one 3/2 in Key West proper for less than $525k. ONE.

My Analysis

This deal is not up to the standards and numbers a lot of people on here are coming up with by any means. When I move out of the 1/1, I can rent it for at least $1500-1800, putting total rents at $4500-5200 a month. This would put me at 1% of the financed amount. Issues I am not happy about are insurance costs. Massive out here. This brings me closer to 0.8%.

Still, better numbers than I had before and I’m over renting personally, so I didn’t want to take 6-12 months to find a home for myself. It’s going to be a great learning experience for me, and when/if I leave in 3 years, I can reassess where things sit and go from there. 

The major disappointment in my mind is requiring monetary help to get the down payment. That said, with the "cash flow" I'm getting, I can aggressively save and be ready to start looking for less expensive markets in about 6-12 months.

I'll post updates as they come along!

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