Been listening to the podcasts for a couple years now...starting to become more knowledgeable and confident...I think?! Anyways, I hear Brandon turner say in the podcasts “just buy the first deal!” I know this deal is not killer, but what are your thoughts for a first deal. I have made zero offers on other deals, but have been “looking.”
I rent my current living space for $450/month. I’m single, make $3k a month...yes working on improving that. I am a licensed real estate agent as of December last year (6 months ago). Currently have a W-2 job though.
So here is a deal I’d like advice on.
I live in Whatcom County in Washington state. I met an older guy the other day that owns and lives in a duplex, but then also owns the duplex right next door. He is getting older and is planning to sell the duplex he does not live in in the next “1-2 years” after he “fixes it up just a little more so I can get maximum value.” He threw out there that he thinks it’s worth $260k-300. (He’s probably close on that.) The home is in a good area between Bellingham and Lynden. It is located on a fairly busy/noisy 2-lane rd. The duplex is in alright shape...not much room to add value after repairs in my opinion. I have seen it. 800-900 sq ft per side, 2bed/2bath, each unit has a garage. It is currently rented below market rate at about $780 per side.
I would not want the current tenants to continue to live there. As I was talking with the owner he went on for a while about how they were not good tenants and always doing things to violate the rental agreement. Plus, I need to raise the rents by several hundred dollars, so not likely they would stay long term anyways.
Let’s just assume I bought it for $280k, put $5k into it, then rented each side for $1000 (which falls short of the 1% rule. I could potentially house hack it and live in one end of course.) It would cash flow about $400-500 per month.
Should I dig deeper in to this and see if it can work or just move on to a better deal?
I would pass on it. Seller does not seem motivated to give you a better price. But since you are an agent keep talking to him and maybe he will give you the listing when he does sell it.
@Ben Black Before you do anything else, take that 1% rule and toss it. It's not a rule, it's a guideline, and it doesn't work for anywhere in western WA. If it does somehow, there's something seriously wrong with the property.
It's also a good idea to think about your longer terms plans. They need not be perfect since they are guaranteed to change, but it's good to have a rough idea where you'd like to be with your real estate investing in 10 - 15 years.
Brandon's right, you need to just buy something. Too many people are looking for the ultimate perfect deal when something that's only "pretty good" will do the trick. Those people looking for the perfect deal never find it and end of blaming the market for their misfortune.
Lastly, i wouldnt let someone else dictate what a "good" deal is. Each person has different tolerances for risks, different plans, and very different capabilities. What might be great for someone else may not be for me, or you, or most other people. The deal is good is it meets "your" criteria alone.