Hi everyone, I've been looking around on BP for awhile and considering if investing in real estate is the best move for me. All the posts and tools have been so helpful is giving me an idea of what to look for. My husband and I are both employed full time with good incomes and we're in our mid twenties. We currently own our home in Connecticut but are planning on selling in 2016 to move to New Hampshire.
We have been looking at duplexes in Manchester, NH. We were considering buying a property now and renting both units until we move in a bit over a year then owner occupying 1 unit for several years before buying a single family for ourselves and while continuing to hold on to the property long term. The property we are interested in is about 2 hours from our house and my husband does have a background in construction.
The property is listed at $234,000, I would hope to get is for $200-210k due to it being on the market for quite a while, it is in good shape with a newer roof, windows, furnaces etc
Based on the home being 210k:
Typical rents for area, property was prior owner occupied entire building so is vacant
1 3 bedroom 1 bath unit $1300 1 2 bed 2 bath unit $1100 total=$2400
We would plan to put 20% down, our mortgage at 3.75% would be=$778
A quote I got for homeowners insurance was = $134/month
Vacancy = 10% = $240
Property tax = $383
Water/Sewer = $40
Maintenance = 10% $240
Management = 10 % $240 (Ourselves, but will hire people until we move to NH to owner occupy)
Monthly cash flow = $385
annual gross income = $28,800 annual expenses = $24,180 annual cash flow $3,820
cash on cash return $3820/$42000 = 9.09%
ROI $3820/$210,000 = 1.8%
I'm not sure if this will be a worthwhile investment, the main reason I am interested is that it is in a good area, the north end of Manchester. I feel like will be easier to manage, versus buying in a lower income area for a cheaper price and possibly having better cash flow.
I would hope to rent the 2 bedroom unit on a month to month lease and then move in to it next year and hopefully just have the tenants in the 3 bedroom pay my mortgage and have minimal expenses while saving for another property.
Does this seem like a reasonable return for a first investment or should I look elsewhere?
Thanks for any advice.
Annie, that is a very low return to manage from 2 hours away. You've also left out a few expenses and considerations.
1. Is there parking? If so, you've left off snow removal expense, and don't forget walkways, even if there is no parking. (If there is no parking, don't buy it) and lawn mowing
2. Common area electric
3. Heat if the tenants don't pay it
4. I think your water/sewer is way too low
5. If you're planning on moving into it, I'd either wait til I was actually moving to get the better financing that owner occupying affords, or buy another one when it's time to move.
thanks for the response Ann, the electric and heat are both seperate so would be paid my tenant, I just based the water/sewer off of what I pay in connecticut for my single family and doubled it.
I did forgot to factor in snow removal and lawn care, there is off street parking for a couple cars,
Waiting my be the right option, I'm kind of up in the air as to whether that's the right decision as I'm worried property values could increase within the next year and make it more expensive to buy property,
As usual Ann Bellamy is absolutely right. But I think what she's getting at in her comment about buying another one when you move, is that if you live in one apartment, you will in effect be paying a discounted rent. If you can save up another down payment for a second Duplex, you may be able to end up living rent-free. That's how I started out, and if you look at what that really means it will give you some perspective. Most peoples first thing they want before they retire is to have their home paid for, which gives them Taxes as their only rent payment. If you own 2 duplexes, and the tenants rents pay all expenses, including taxes.... you live rent-free, and you already have a better situation (before you retire) than what the average person has when they retire. And don't forget that if you're living rent free you can put that $1300/month ($15,600/yr.) towards buying more Real Estate at a good ROI. Just a different way to look at it!
Hi Annie. I am a local realtor. Happy to help guide you on the local market.
I'll send you a private message.
Water varies significantly by location, call the water utility in Manchester and ask them for the annual history.
Also, ask a few of us what our plow bills were this past winter. I'm afraid to look at my P&L because I'll just have a coronary, I was writing checks every few days.
what's typical plow bill like? I know normal for us is $30-40 each time for a normal driveway.
Once we move we will plow ourselves with our personal truck.
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