How does this duplex look for my first house hack?

Question

Here is the property with me living in it: https://bp-v-newproduction.s3.amazonaws.com/upload...

And here it is after 5 years when both units are being rented and the MIP has dropped off: https://bp-v-newproduction.s3.amazonaws.com/upload...

Does this look like a good first investment? This is also assuming that I get the property at asking price, though I'd probably offer a bit less. Do my CapEx and monthly repair numbers look reasonable?

Gena Kirkwood · Answer

You should figure everything as if you aren't living in the property to be accurate. That includes expenses for maintenance/rehab, utilities, trash, and management (even if you are managing). That will tell you if it is a good deal or not by looking at the cap rate. FHA has a lot of restrictions so I would be talking to an investor friendly banker and realtor to help you with that. What is a good deal for me might not be for you. You need the cap rate, etc. whether you are buying it to live in, totally rent out or flip to someone else.

Wholesaling is the best place to start if you don't have a cushion of money. It is also the fastest way to pay off bills, etc. until you can afford the set backs with rentals and believe me there will be plenty! I'm dealing with a built in oven for a tenant today.

Have you gone to any of the REIA meetings? There are investors and bankers there that can help you with your numbers too.

Lucas Mills · Answer

@Gena Kirkwood - I would hope to put myself in the best situation possible by screening tenants well. I am aware that it is certainly not an ideal situation, but do we not have to do less-than-ideal things when we're first starting out?

Using FHA to get my first decent rental property seems to be an intelligent choice since I am currently paying $664 per month for rent before utilities. In this scenario, provided I had a tenant, I would be paying only ~$200/month to live in that duplex. That immediately gives me ~$600 per month to put towards my next real estate acquisition.

So back to much original question - does this look like a good, cash flowing property to invest in, given the provided analyses? Do my numbers make sense or am I being too conservative or too liberal with any of them?

Gena Kirkwood · Answer

It is hard to live in the same place that you are renting out. You see and hear everything that your tenants are doing and they will be right there at your door every time they need something whether it is big or small.

Lucas Mills · Answer

@Marko Cvetkovic it's within 1 mile of an elementary and high school. As far as the area, it's a somewhat lower income area but it's not embedded in a ghetto or anything like that. In fact, it's possible that this area may see future development because it's a couple/few miles west of Missouri State University. Personally, I would feel comfortable living here, but this is just based on my perception of the area and the apparent quality of the nearby units/yards/etc. Pretty anecdotal, but it seems like a halfway decent area. There's a really nice house across the street which you can see if you look at street view on google maps.

On Zillow it says the property has been listed for 85 days, which seems like kind of awhile. But as far as I can see, it's a decent buy even at asking price. One of the units was recently renovated, the other isn't in much worse shape based on the pics. Both units appear to be more or less immediately livable - certainly the renovated unit.

Marko Cvetkovic · Answer

How is the area and school district?