House hacking a duplex in Wilkes-Barre PA?

Question

Hello BP,

I am looking to purchase my first home in Wilkes-Barre PA a Duplex.

The home is a foreclosure the bank has agreed to sell the home at 65,000.

I will be putting 10% down and my lender will pay the closing cost. My interest rate is 4.785.

The thing that I don't like about the house is the taxes and the insurance.

Taxes for the house are listed at $ 3,568.94 and I received a home insurance quote of $ 1,447.

Purchase price: $ 65,000

Down payment: 10% $ 6,500

Interest rate: 4.875

Taxes: $3568.94

Insurance: $ 1,447

Monthly payments: $ 745

I will be living in the house on the right side and plan to rent the left side. The house is in excellent condition, The electric and water was on when I walked through the house. The only thing I will add on the home is a 2nd bathroom on the left side sometime down the line.

I plan to rent the left side of the house for $750.

I was hoping to get some feedback from the BP community.

Additional details can found here:

http://www.flexmls.com/share/Gbhu/499---501-FRANKLIN-ST-S-Wilkes-Barre-PA-18702-http://www.realtor.com/realestateandhomes-detail/4...

Let me know if there is any more information i can provide.

Thanks!

Kevin D. · Answer

I grew up in that neighborhood and I'm still local. $750/month seems a little rich for that end of South Franklin St. A few blocks north, closer to Wilkes and you would get that easy. Either way, I think the deal looks good. W-B City is pretty strict on landlords, so just make sure you have all your ducks in a row. Keep me posted on whether you can get $750 in rent. I hope you can, because that means I can raise my rents!

Shawn Mcenteer · Answer

Looks like a good deal on paper.  You should account for capx and vacancies which will have to come from the money you save by living rent free.

Andrea Maddison · Answer

@Antonio Boone

Hi Antonio,

My husband & I are actually contemplating investing in the Wilkes Barre area. We purchased our first 2 family home in February and are looking for our next investment, but outside of NY.

Could you give me some insight on the area and what it's like to be a tenant in the area?

Thanks

Antonio Boone · Answer

Hey Joseph,

Thanks for going over the numbers. For your calculation would I only be breaking even after refinancing and getting rid of the PMI while renting each unit for $750 a month?

For monthly payments I mean Mortgage Taxes and Insurance is estimated to be $745.

I am hoping to accomplish a few different goals with this house.

1. Live mostly rent free.

2. Make a little cash flow.

3. (Most important to me) Get a hands on education in real estate and being a landlord.

4. Have a nice home.

5. Use the equity in the home to find an buy a great deal.

I'm just a little nervous about the taxes and insurance on this house making this a total disaster of a start.

Antonio Boone · Answer

Thanks for checking this out! In your experience what have you been seeing typical of the area for 5 bed rooms? I won't be jump out of the gate really fast  to rent  due to the strict rent policy of W-B. I want to do everything in stages and i want to make sure i can craft a lease that will coincide and help alleviate the policy for rentals in Wilkes-barre. But if I happen to get it rented out for 750 I will be sure to let you know.

Joseph Adelmann · Answer

Hey @Antonio Boone,

When you say Monthly payments, is that your mortgage payment total? I assumed it was for what follows:

Whether this is a good deal or not depends on your goals. I broke this down assuming you rented both units for $750 and you'd be about even assuming 10% vacancy rate expense, 5% repair costs, and 10% for property management fees (may need it one day and if you don't use property management, this budget could go towards surprise expenses).

And, if you build up 20% of equity and refinance, your mortgage payment should drop by about $100 per month by shedding the mortgage insurance. I estimated the cap rate to be 13%, which is good.

I've heard some of the speakers on the podcasts target $100 a door per month for cashflow, which this deal would have a hard time hitting at $750 of rent from both units. If Kevin D. is right, about $750/ month being too high for that area, then you're making out worse on say $700 per month.

Good luck with what ever your decide though!

How is the real estate investing scene in Wilkes-barre?

Joseph Adelmann · Answer

Hey @Antonio Boone,

If $745 is the total of your mortgage, homeowner's insurance, and property tax, then I was overestimating your monthly expenses. If you were able to get $750 for each unit and assuming the same expenses I used in my first post then you'd be getting $380 each month.  Would tenants pay for all of the utilities?

It looks a lot better now and even if you could only rent them for $675 each per month, you'd be making $267 per month. My goals are the same as yours right now and I would be interested in this property if I were looking in that area.

Antonio Boone · Answer

Thanks for  taking a look! I have still studying up on cap ex trying to find out the best way to calculate it. Since this will be my first house an i will be living there for 3 years or less, i  hope to get the feel for vacancies so i can get an accurate number. So far i could only find 13% for my area and i am not sure if that will be true of a house this size and the rent i am looking for.

House hacking a duplex in Wilkes-Barre PA?

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