Numbers for our first OO Duplex

3 Replies

Here is the our current situation:

21 & 23 married (starting out investing young!)
Currently paying 1060 in rent 

The deal we are hoping to close on:

2 unit home:

Upper Unit - 1br, 1ba Current Rent:600, once we get new tenants, I think I can get 700 or 750

Lower Unit - 2br, 1ba Current Rent: 750. plan to occupy this unit. upon move out could probably get 1050 if I add a washer/dryer

Close to downtown, 2 blocks from VERY nice YMCA, 3 blocks from University

The numbers:

Listing Price: 149,000

Winning Bid: 152,000

Appraisal: 134,000

Final agreement: 134k + 6k seller finance (hand shake) 2 years @5%

5% down + closing costs = 12.3k out of pocket initially

Monthly expenses:

P&I + Insurance + taxes+ PMI = $991/month

sellers financing = $264/month (I'll probably pay $300 to speed things up)

$1255/ month - ($750-33% for vacancy, repairs, other stuff) = -1255 + 500 = $755 out of pocket. (1st two years)

-991 + 500 = 491 next few years

-991 + 500 + 705(67% of 1050)= 214 cash flow ($281 after PMI)

$755 Compared the $1060 I pay in rent currently, I feel like I'm making 305/month. I know I'm really not, but it feels like it. Plus I'm building equity at 23!

This is my first property. So I want some feedback!

@Vashti Green

The numbers look good if you get the 750 +1050 rents you are expecting, but its negative cash flow if you don't.  How much will you have to spend for improvements in order to get the higher rents?  Did you factor utilities into the 33% for "other stuff"?  You might also throw a 10% in for property management because you might not always want to self-manage this after you move out.  

@Vashti Green , winning bid $152,000; appraisal $134,000 - final agreement $140,000?

Firstly, that probably means it's a better deal for the seller than it is for you, but, I don't know all the surrounding circumstances, and, I do believe buying is better than renting!

Anyone who bids more than asking price is not thinking like an investor first and foremost, but, "happy life" often comes at a consumerism cost.

Nonetheless, if you do want to start thinking like an investor, I propose that you live in the one bedroom unit, and rent out the larger unit for its higher income! Yes? All the best...

@Derek Kirkwood As for improvements, I just need to get a new washer/dryer, update the driveway, and put a fan on each stove(maybe not needed, but its important to me), so in total less than $2000. 

I did not fact in utilities, because the renter pays those and as a renter, I currently pay my own.

I agree with adding in another 10%. If I do that, I it becomes a $66 cashflow. But also, this wouldn't happen for at least 3 years, so the 

@Brent Coombs The original posting price was $199,900, it gradually decreased to $149,900. If it was the summer, it would have appraised at $150k. But its the winter in Michigan. I bid high because I knew it would appraise low and that we would have to meet lower, and that by that time I knew that the seller would be getting annoyed and would be more eager to sell. Also, since i dont actually need the house, It felt like a good risk, and it paid off.  I %150 feel that the house is worth $155k if its in the market in the summer, plus the near by school is expanding and the neighbors that they often get cash offers (from developers mostly) to buy up the houses for at least 20% more than what its worth. I don't plan to sell for a while, I just want a smaller rent and better proximity to my husbands job.

I would love to live in the upper(i hate people above my head) but its currently occupied until July, and then we wanted to live in the bottom to use one of the rooms for AirBnB all summer

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