First Property - Duplex in Tx Help on Numbers

5 Replies

Hello BP,

This is my first property to seriously analyze since looking for a duplex in the Houston area. I cant seem to get the numbers to work for me and am asking for your help.

I am analyzing these number as if both units were rented out, but i do plan to house hack for at least the first year.


Asking: 199k

County appraised: 145k

estimated rents in the area: 1200 per unit

estimated property tax: 300 month

estimated property insurance: 120 month (very loose estimate)

estimated vacancy: 8% ($192 a month based on 120,000 purchase price. I used 120,000 because that is 80% of appraised value. i question this.)

Loan would be FHA with 3.5% down.

Based on 120,000 purchase

loan amount: 116,400 over 30 years

down payment 4,200

4.0% interest

P&I 555.71

using the 50% rule i come up with the following expenses:

50% of income: 1200

P&I: 555.71

Vacancy: 192

Insurance: 120

Property tax: 300

Total: 2367

This equals a cash flow of 32.29

Am i over compensating for expensive by not including vacancy, insurance, ect into my 50% rule amount?

How should the county appraised amount compare to the asking price? Other duplex's in the area reflect the same appraised amount.

@Ernest D.

Don't even look at county appraisal when evaluating your property- except to determine your annual property tax bill. The counties are all over the place with their valuations... And most investors fight the county to lower the appraisals every year.

As for your have made a massive jump from asking price to purchase price... Unless the seller is extremely desperate- (possible but unlikely in the Houston market)- do you think the purchase price is realistic? If not, then all your other calculations are off the mark from the start

The 50% rule covers taxes, insurance, PM, vacancy, maint and repair, etc., so you are double accounting for some of those expenses, which is hurting your numbers. Also, vacancy is calculated as a percentage of the monthly rent, not the value of the home. So in this case, 8% of $1200 rent would be $96/month vacancy factor.

The 50% rule is a just a quick way to screen a property to see if it is worth a further look. If you know more precise numbers, it is much better to use those than lump them into the 50% rule. Hope that helps you. 

I don't know if that purchase price will happen. And using the 50% rule is just a start, you can use the BP rental calculator to get some deeper detail on the numbers. But I think it looks great, that certainly looks like house hacking potential if you live in one half and rent out the other. Any estimated repairs or concerns if it's an older property? Oftentimes you'll need new appliances, paint, etc.

@Jeff W.

Thank you for clarifying that for me on the appraised value. As for the purchase price, i really didn't have anything else to go off of at the time. I was literally in the area as i drove by and seen the FSBO sign with just a phone number. i did my analysis before finding out the sale price from Zillow from a friend. I am trying to do my due diligence before contacting the owner.

@Sharon Tzib

Thank you as well for clarifying the 50% rule for me. Looks like i need to run my numbers again. 

@Vincent Crane

Thanks for the reply. i agree the purchase price was far fetched. I was trying to see what needed to be done to get my cash flow to work. Time to get my expenses re-aligned. I did not estimate repairs yet. i want to see if this will work with as a "ready to rent" unit first. Repairs will be out of pocket on purchase or on sellers expense if possible.

I will dig deeper into these expenses for a better analysis. 

Again thank you guys and gals!