Did I make a good purchase ?

Question

Im recently closing on a duplex I just bought . This would be my first investment and getting kinda

Nervous if I made a good call or not . Obviously, you guys don’t know my market but, their were some less nicer duplexes that I went to go see that sold for 150,000 and rents were about 650 a month for both units . These I closed on I paid for  were 187,000.  Owner wanted 190,000 , but we agreed for him to pay closing cost so he went down a bit . Those units rent for 800 each . I got a fha loan on them so I’ll be living in one side for about a year and continue investing .  Ultimately, I got a 2.7 interest on them so that was great .  I’ll be paying around 1100 a month for them including insurance and taxes . I tried the rental calculator and it said I’ll have a cash return of 48% -56% . It sounds to good to be true . If you guys can give me some advice on what to do next and if I really get a good deal ?

Robert Beardsley · Answer

we would need more information, do you pay utilities, how old is the house, taxes, insurance and so on. if you are going to house hack i think you got your self a great deal, on paper it looks like you only get 3k off asking but if buyer is bring all closing then you really actually got it for a lot less some thing alot of people seem to miss in my opinion. i just closed on a deal in march i got seller to come down on asking price but also had him pay almost 11k in closing. that is money i can turn around in invest into the property. closing on 190k is probably around 5kish. the other way i see it is at 2.7 interest rate thats like free money. you may not have gotten a steal of a deal but hey our first deals never are. also your Cash on cash return is that high because you arnt putting much down and you arnt paying closing so yes those number probably are right. just remember that cash on cash is on what you put in. i you put in $100 and got $50 you get 50% percent looks great but 50 bucks isnt much.

with all that being said you are house hacking so the deal will be just fine.

Randy Velazquez · Answer

@Robert Beardsley also the duplex is about 10 years old .

Randy Velazquez · Answer

@Robert Beardsley my insurance is like 120 and taxes about 170-200?? I know I’m not paying more than 1100 for the property .  Only  thing I’ll be paying for is really lawn care and saving money for other stuff in the future vacancy , repairs and so on . Appreciate the feed back!

Randy Velazquez · Answer

@Shawn Ackerman appreciate the feed back man !

Shawn Ackerman · Answer

@Randy Velazquez a "really good deal" is relative.  Did you buy for appreciation? because the area is desirable, close to work etc....Those would be good for you.  If the property was non-owner occupied I would tell you the deal is terrible from c a cash flow perspective but perhaps you are aware of somethings happening in the market i.e. gentrification.  There are usually two schools of thought when it comes to deals.  Cash flow and appreciation.  Since you can predict appreciation perhaps your answer will come in the future.  However if it is worth $190K and you bought it for $187K, and if that is market price, you did not get a good deal today, perhaps tomorrow.