Please help me analyze this Duplex Deal

17 Replies

Hello Investors, 

I'm in the process of purchasing my first house hack property. I'm looking for some advice to see if the property is a good deal. I'm using a VA Loan and the property is a 2 bedroom 1 bath duplex.

The property is new construction and already has a tenant that will move in once the property is completed on 1/28. The tenant has paid 1 year worth of rent that would be transferred to me after closing. Any advice is greatly appreciated. 

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*This link comes directly from our calculators, based on information input by the member who posted.

Hi @Dwight Porter congrats on getting the ball rolling! I am not in the Houston market, so I can't say how good of a deal this is for that market, but I do have a question.

It says "Fully Leased units". My question is would you be able to move in? If they're on one year leases that are already signed, those leases must be honored (they're legally binding contracts) and you won't be able to house hack this property. 

I’m fairly familiar with the Houston duplex market. What is your question specifically?

theoretically this should be an easy deal to analyze. You already know what the tenant has paid/is paying. I asume you know how much you’ll need to put down and rates you’ll be getting?

Get an insurance quote and run the numbers. It’s brand new so cap ex shouldn’t be an issue. If it comes with a 1 yr builder warranty even better. 

See if it works with you paying the difference while living there and ensure it works once both sides are rented.


Originally posted by @Ryan Johnson :

I’m fairly familiar with the Houston duplex market. What is your question specifically?

@Ryan Johnson

I'm new to Houston RE and I've been looking (in HAR and other online MLS) for multifamily properties and I only get like 5 and out of those 5 3 are SFH with a shed on the back they call an apartment. So how can I find multifamily listings for Houston and soraounding areas (The Woodlands, Conroe, Katy)?

 Thanks, JRG

@Julio R Gonzalez

Hi Julio, I got my 4 unit in Conroe by calling rental listings. I made reasonable offers to anyone that would be willing to talk, I think I came out of it with a pretty good deal—the owner was tired of being a landlord and it showed in the rental ad.

@Dwight Porter using the calculator, assuming 50% rule (which is probably too conservative for a new property) you'll be paying $150 per month for your living expenses. After a year move out and stick another tenant in for $2500/month, if that's truly the going rate) and that's incredible cash flow for a 100% LTV deal. Then you can apply the rest of your VA to the next property.

@Matthew Reum

I'm also new to REI but I think that what he means is "capital expenditures" which (correct me if I'm wrong) include new roof, new water heater, and other BIG expenses that don't happen every month. I'm sure the BP dictionary has the meaning of it.
https://www.biggerpockets.com/...

Hey Dwight, this looks like a decent deal if you can use your VA loan.

The location there in Acres Homes is one of those transitional areas that is improving.

Hey, I'd love to learn who is the builder on this one. I'll reach out, maybe we can go have a brewed beverage one of these days.

Hi @Dwight Porter , thank you for your service to our country!

I'm showing this is a 2-BR, 1-BA.  And you've budgeted $2,500 in monthly income.  Does that mean you're planning to occupy one room for free and rent the other bedroom for $2,500 per month?  I rent 1 bedroom in a 2-BR in San Francisco (one of the most expensive cities in the country) and I only pay $1,750 per month.  Make sure you can find a tenant who will pay what you're estimating.  And don't include the money you'll save on rent in your income estimates.  As far as you're concerned, that's just gravy.

Also, find out how much the current tenant is actually paying, and when their lease ends.  Also find out what their credit score is, monthly income, length of employment, etc.  You're essentially signing up to be a landlord, so your due diligence will be crucial.

If you're indeed using this as a house hack, then I agree that 2% for capex and repairs are totally fine since this property was built in 2016. According to your analysis PDF, the ideal time to sell is 5 years from now (your IRR at that point is 55%). Be careful if you plan to sell before then, since your profit might actually be negative:

If you're planning to do the "buy every year, move every year" house-hacking strategy, the above numbers could make that less-than-feasible.

so the other tenant has already paid 2500 for 12 months you say?

also another question to ask yourself is: is 2500/mo per unit under market, at market or above market? and if tenant moves out, will i be ok with getting less than 2500/mo?

Dwight,

I'm a real estate broker in Acres Homes. Born in the Trae and raised in the 44 (Acres Homes). You may want to check your numbers you're showing what looks to be $1250 a door, if you are occupying one your gross rent is only $1250.

For a 2-1 in Acres Homes it's not $2500 and probably not $1250 either, especially without a garage.

Please have your realtor run solid comps. That said...go ahead and add the cost of a nice wrought iron fence and sliding gates on the front end.