First Duplex. My numbers aren't 2%. Owner-occupied - Seattle area

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First Duplex. My numbers aren't 2%. Owner-occupied - Seattle area

Matthew Richey
Kent, WA · Member since 2016 · 14 posts · 1 vote

I'm about to put my offer in for a my first real estate investment.

In Auburn, WA which is about 40 minutes outside of Seattle,WA

 Listing price was 330k and dropped $5,000 about every 6 days which is now $315k I'm about to make an offer at 250k comparables in the area have sold $235k to $265k

The tax appraisal is 281k

Total square footage is 4200 and its a duplex 2100 square feet is on the top floor and then in the basement has a family room and unfinished portion.

I would be living on one side  or possibly making the basement into a another unit for owner-occupied

Offer price $250k with 25k down at 3.6% interest rate

Current rent that's collected $1930

Operating expenses including 10% for repairs garbage, sewer, insurance property tax is $745

Mortgage $1007

Mortgage insurance $111

 that would be a .37% for the 2% rule

I was thinking I could possibly raise rent possibly $1100 and then if I was able to make that apartment get those numbers better.

No other offers on the property currently has bad curb appeal

 Any advice would be much appreciated as I'm wanting to jump into real estate but don't want to make a huge mistake.

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Alex Chin
Seattle, WA · Member since 2015 · 500 posts · 243 votes
10y

Hey @Matthew Richey. Without getting into any deep analysis, I would say the first thing you need to remember is that if you're going to be owner-occupying the property as a househack, your equation changes entirely. The goal is not to generate some kind of massive monthly cash-flow, you are looking to defray your living expenses while gaining valuable hands-on management experience and building equity in a property with a very low interest rate.

Don't start evaluating this property based on the 2% rule, 1% rule, or whatever. Instead, look at it from the perspective of: "Well, I need to live somewhere, and it may as well be "free" to me so that I don't have $1,000+ going into someone's pocket ever month." Treat extra cash as a bonus on this property. If you can finish the basement and get a studio apartment out it, so much the better (make sure that this is permitted first!). My instinct is to advise holding rents slightly under-market as your priority in this situation is to minimize vacancies so as to reduce your personal operating costs.

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  • David Moore
    Investor · Crystal, MN · Member since 2013 · 486 posts · 277 votes
    10y

    @Matthew Richey

    I've had a seller say no, flat out, then call back a week later and take our offer.  It was a bank, though.  Something to consider...the inspection can give you more negotiating power.  If your top dollar is $290K, meeting him at $295K in the middle may still likely get you to $290K.  Just a thought.   There will be other places.  I've had contracts on several places I ended up not buying after inspection.  

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  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    10y

    @Matthew Richey, given your stated lower comp figures and its lousy street appeal, and your desire to buy right, and often, I'm wondering WHY you even went up to $290k!?

    ie. I suggest that you take their "no" as your opportunity to give it a long, cold, unemotional look.

    Ask yourself: what is there about it that makes me WANT to pay more for it than anyone else?

    Please, don't get caught up an with an "I've put a lot of work into this and just want it" attitude!

    ie. You haven't justified a $290k price to us, (from whom you've asked our help). Thanks...

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  • Matthew Richey
    OP
    Kent, WA · Member since 2016 · 14 posts · 1 vote
    10y
    Originally posted by @Brent Coombs:

    @Matthew Richey, given your stated lower comp figures and its lousy street appeal, and your desire to buy right, and often, I'm wondering WHY you even went up to $290k!?

    ie. I suggest that you take their "no" as your opportunity to give it a long, cold, unemotional look.

    Ask yourself: what is there about it that makes me WANT to pay more for it than anyone else?

    Please, don't get caught up an with an "I've put a lot of work into this and just want it" attitude!

    ie. You haven't justified a $290k price to us, (from whom you've asked our help). Thanks...

     Upon further investigation found out there was a third door to access the basement from outside, unfinished 1200 square footage in the in the basement, newer roof, detached garage I think the comps are low. I may be overpaying but I think the potential is pretty great compared to what I've seen the last three months.

    Negotiation update: I'm at 292k and they are at 295k I pretty much stretched it as far as I will go.

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  • Matthew Richey
    OP
    Kent, WA · Member since 2016 · 14 posts · 1 vote
    10y

    Update: after several weeks of silence I told the seller I was still interested long story short they accepted the offer I did an inspection and there's black mold in the attic, some electrical work, mold in all the windows, not properly vented attic, bathroom mold, needs new carpet and cosmetic stuff. Looking into having a mold inspector come out and possibly doing a rehab loan as I have  about 25k to work with including the down payment. 

    Or possibly just walking away

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