I'm a huge fan of this site and have been checking it regularly for a few months now! It's time for my first post! I'm hoping to get some honest feedback on a duplex I'm thinking about purchasing.
I work in property management currently and realize this is something I want to do long-term. I've come across a duplex that I'm thinking about purchasing. Currently, 1 unit is rented, so there's an open unit. I'm planning to purchase it with a FHA loan and live in the other half for the first year. With this plan, I would need to contribute ~$150/month to break even the first year. However, after the first year I can move out and rent the other half. By doing this, my cash flow increases dramatically and I have a 55% Cash ROI that first year. I've done a ton of research and really think this would be a great move for me. I'm 24 with little debt and a great job. I tend to overthink things at times and have read many times on this site that "your first deal is always the hardest, most nervewracking, etc", so I'm just looking for another perspective. Looking forward to hearing your feedback!
@Alex N. Congrats on your first post and your decision to take some action on your real estate ventures. My wife and I have done the same thing "House Hack" as Brandon would call it. It sounds like a good move. I would just make sure that you get all the paper trail of rent of the current tennant and not just take the currents own for it that they are a tennant in good standing. Also consider all utilities costs and all possible repairs that may need to be done.
Good luck with everything
Thanks for the replies @Jordan Thibodeau ! I appreciate it. I'm fairly far into the process actually. I've received all of the owner's financials and have done my due diligence. I guess I'm just looking for some more reassurance that it's actually okay to take a loss in the first year. It makes me nervous, but I'm also so excited about this! I can't stop thinking about it!
so you pay $150/mon for your half the duplex? Or $150 + what a normal renter would pay? Run the #'s. If you can own cheaper than rent, then it sounds great. They pay down debt, + maybe some appreciation. The power of leverage
@Pat McGrath I would pay $150/month total. After that year, I would move out and rent to somebody who would pay market. I just live for free currently. Looking at how you just worded your post, it really does seem obvious. Thanks! I'm going to go ahead and submit my offer tomorrow!
ive never been able to live on $150 mon rent. Lowest was $300 at college & that was 1/2 an apartment & 13yrs ago. But ive only lived in cali.
@Alex N. we pay $158/month so we are in a similar situations. Since its your first investment living in it will give you the opportunity to safely save and prepare for your next move. if you have tons of available cash I would go head and rent a cheap apartment and rent both your units out. But if you don't have allot saved up this is a good move.
For example. Lets say you rent out both units and you get an apartment, and for some reason you need evict the tenant and the water heater breaks. So at that point you need to pay all that plus your rent, if you don't have a good emergency fund you may find yourself in a bit of trouble.
I'm sure arguments can be made either way but at the end of the day its a manageable way to start investing. We look at it this way, we could be the average American Family struggling to pay our mortgage but instead we have a great starting investment and we only pay $158/month. Sorry if I rambled its 3:30am lol
This sounds like an awesome way to get started to me. I wish I could go back in time and buy a duplex at 24 instead of my first SF, which I sold for a profit but nothing close to what my cash flow over the past ten years could've been.
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