First Post and Deal

2 Replies

Good morning, 

I woke up a few weeks ago and decided to get into the real estate game. I have some medical issues that prevent labor already, sometimes typing in the office is to much. I and 31 years old and my hands are betraying me.

I love my 403b and am a buy and hold investor there. Figured I try to get a few rentals to replace my income down the road when I can't work.

I live extremely rural in a community of 10,000.  The average renter makes between $26,000 and $36,000. The town averaged 4% vacancy in 2013 (the last time figures are available).  The average 2 bedroom rent is $681.

The real estate agent I bought my house from has put her duplex for sale. The sale of it would fund get daughters college entirely. The list price is $49,900, recently dropped $5,000. Both units are currently rented, the costs won't be known until Monday.

From the outside the property looks unkempt. Two trees either need to be trimmed or cut down.  Yard needs some love. The pictures on the listing showed clutter on the inside.  When driving by the property, the remnants appeared to be elderly.  One was outside with a medium sized dog. 

For financing I am looking at two or four different options. Pull equity from my house and pay for it outright. I really like this, because if 08 happens again we still own a duplex out right. Pull enough equity from our residence to do a 20% down payment. Wife likes this because our payment won't go up much. (Our mortgage payment is 18% of my income.) Borrow a downpayment from my wife's well to do parents- I really don't like this. But my least favorite option, pulling the downpayment from my 403b.

Before I do anything though.  Does this deal make sense?  Am I rushing into this? What am i missing?

Thank you guys for your time. 

Howdy @Curtis Shotliff

I can beat that.  Population where I live is only 1,600.  However,  we have a strong demand for rentals and housing in general.

If you are saying you can get $1,382 Monthly Rental Income ($681 per unit) then that's really good. You need to figure out what the ARV or Fair Market Value of the property should be if you were to Rehab it to like new condition. It sounds like you are suggesting repairs/improvements need to be made. If so try to get an idea of what renovations would cost.

Once you get an ARV and Rehab estimate you can determine a reasonable offer.

As far as the Financing goes I am a firm believer in using as little of my own cash as possible to invest. Consider this. If you use a HELOC you will have to repay it within 20 years. Therefore, I would not use it for the full purchase (and any Rehab you may do) unless you plan to Refinance the property eventually . By the way I use a HELOC (to pay for all Rehab, Holding, and Closing costs) with all my investments. I also use a Private Lender for the initial purchase of the property. Once the property is in rent ready/like new condition and fully rented I Refinance it to payoff my lender and HELOC. Then I can do it all over again. This is commonly referred to as the BRRRR strategy.

If you are looking to grow a portfolio to gain passive income to replace your current income this is a perfect strategy to use.  You might think about using a combination like I use.  

Hope this helps.

Thank you for the response. The HELOC is more just going to be for the down payment. Getting my wife on board is the hard part! I will be sending my contractor through once financing is secured.