Help Analyze A Deal For A Duplex Outside NYC

[Justin Pandolfino]

Hi BPers,

I am new to the forum and have an investment I would like help analyzing.

I have $150k and am deciding between buying and living in a multi family house or buying a single family house and investing the difference in mutual funds. I have not found a single family house but would look to spend around $350k with a 20% down payment.

The multi family house I have found and am considering purchasing is a duplex that is outlined below:

Asking Price: $500,000

Loan Details

• Down payment: $100,000
• Loan Amount: $400,000
• Interest Rate: 4%
• Loan Duration: 30 years

Rent Roll

• Unit #1: $2,500 (owner occupied)
• Unit #2: $2,000

Annual Expenses

• Taxes: $17,500
• Insurance: $2,500
• Other: $12,000

Capital Expenses: $40,000

The duplex is located near NYC, one block from the train station so it is both convenient for me and should be no problem to rent.

My questions are listed below:

• At what purchase price does this duplex make sense for a buy and hold strategy?
• Does it make more sense to invest in the duplex or to buy a single family house and to invest the difference in mutual funds?

Thank you in advance for all of the expert help!

Justin

[Barbara G.]

I think whatever @justin Pandolfino is paying for rent now should be considered part of his rental income even if he lives in his investment house.  So if his fair market rent is $2,000 we would consider  income  at either $4,000 or $4,200 so that's close to the 1% test.  1% would be an income of $5,000 a month.  So would this work?

The price of a house with this income probaby should be no more then $400,00 if it generates $4,000 a  month in rent (including a rent assigned to john)