Deal or nightmare? (central valley, CA)
I have been reading the forum and listening to the podcast for a while, and could not wait to jump into the first rental property. I've been looking in Central Valley since it's a bit more affordable than South Bay. Then I found this duplex around 3-hour drive from where I live, and I visited the property and the neighborhood many time before pulling the trigger.
The property is $235000 and has a 3/2 (rent $1000/month) and a 2/1 (rent $700/month) on the same lot with separated fence. The house was built in the 20s and renovated in the 40s. Both units still look very decent due to good maintenance and the previous owner did some small renovate here and there along the way.
Then during the due-diligent period, one thing went wrong after another. At first, my lender promised that he can get me 20% down 30y fixed rate mortgage on the duplex. Then he told us he made a mistake and we have to put 25%, which screwed up the calculation quite a bit. Then it turned out the property is in AO flood zone, which would cost another $100/month for flood insurance on top of the $110/month home insurance. Then the home inspection and contractor bid came back with $700 for the proof (still good condition), $3000-3500 for electrical work, $3000-3500 for plumbing (leak and damage), $1000-2000 for the foundation (post footing and some cracks), $3000 for window work. I was thinking since it's the first deal, I might just spend a bit more just to learn the process. Then just yesterday, the pest inspection came back with subterranean termite and fungus. Section 1 damage alone is $6900. My agent said it's very unlikely that the seller would pay for more than half of the cost. I still have a few days to decide, but at this point, I am about to throw the towel.
Since it's my first deal, I wonder if these items are typical? Should I just walk away or try to make it work?
Most Popular Reply
Doesn't meet the 1% rule, so I wonder if it is even a cash flowing property before necessary repairs. Personally, I wouldn't buy in a flood zone if the mechanical and electrical systems are in the cellar.