[Calc Review] Help me analyze this deal in Austin, TX -Jake
*This link comes directly from our calculators, based on information input by the member who posted.
Hey I am super new to real estate. I have been binging the podcasts and wanted to try out the calculator. There are many assumptions I am not sure if I got right. There is this multi-family we want to buy for 515K in Austin, TX area. We would live in one side and rent the other side. Both sides are 3 bed/2baths. The calculator asks us to type in the income if both sides were rented. I think we can get 1500-2000 in rent for ONE SIDE. I conservatively put in 3K total rent if both was rented. Right now the calculator say we lose money each month because the cost is ~4K to live in the house. Yet my view is that we currently rent for about 1600. We'd be increased our living space, getting help with mortgage and paying only a small additional amount (1600 current + 1500 help from renter possibly 2000) of approximately 900 more than our current rent to be in the game of real estate.
Questions:
1. Is there a calculator for multi-families you plan to live in one side?
2. Am I looking at this deal all wrong? I am new so go ahead and tear me apart.
Thanks for any help.
-Jake
@Jacob Pham You are looking at the calculator correctly. The calculator is based upon simple cash flow calculations with simplified inputs of whether or not a property cash flows. Your situation is slightly different. You are looking at reducing your housing expenses and increasing living space. That is exactly how I got in the real estate game two decades ago. You will find that every year the rent will go up and your cost of living will decrease. Some years will be better than others.
If you are doing this deal as a VA loan deal then your return is infinite. Keep in mind that the tax treatment will be different for each side. Even your property taxes will be lower than neighboring duplexes as you should file for homestead on your owner occupied side.
Its a great way to break into the real estate game!
Quote from @Aaron Gordy:
@Jacob Pham You are looking at the calculator correctly. The calculator is based upon simple cash flow calculations with simplified inputs of whether or not a property cash flows. Your situation is slightly different. You are looking at reducing your housing expenses and increasing living space. That is exactly how I got in the real estate game two decades ago. You will find that every year the rent will go up and your cost of living will decrease. Some years will be better than others.
If you are doing this deal as a VA loan deal then your return is infinite. Keep in mind that the tax treatment will be different for each side. Even your property taxes will be lower than neighboring duplexes as you should file for homestead on your owner occupied side.Its a great way to break into the real estate game!
Thank you for getting back to me! I'm glad I looked at it right. The homesteads concept is new to me. I will be doing a VA home loan in august 2023. Ideally something will still be available in round rock/ George Town area similar to this home.
So just to confirm essentially conservatively I’m upgrading my space for 900 bucks but if I can get 2k for other side (happy path) I might get more space for only 400 bucks and over time my costs will go down as my mortgage rate stays the same but I can charge slightly more for rent each year.
so is the homestead concept is just some sort of discount on property taxes for veterans?
@Jacob Pham Np. Homestead exemption is for each homeowner to file with the county tax appraisal district that will allow you to claim a bit of a discount on your taxes. Each county has different discounts. Williamson county will be different than hays county. There are various other exemptions too and you should check the county appraisal district's website to get an accurate assessment of the exemptions that might be applicable.
You are correct with your analysis.
Also, keep in mind that your income taxes will be different for each side. And never forget the cap gains tax benefits for living in one side for 2 out of 5 years. In fact, you could switch it over after 2 years and live in the other side for 2 years and not have to pay any capital gains taxes. Check with a cpa that is knowledgeable with real estate expertise to fully understand all the tax advantages.