How to buy my first duplex

3 Replies

What’s up everyone!

I'm looking into this duplex that previously burnt down and is now a new build. They were asking 500k for it, Now it's down to 475k. I'm thinking of selling my house, (we'll make a pretty good profit selling it) and I was going to use my VA loan to purchase the duplex with zero down. Then have the money that we make from selling our house for reserves. If the number add up (on BP Calculator) I would really like to buy it. I just don't know how to analyze the deals I come across. I'm going to start analyzing a deal-a-day but I would really like to get this duplexes.

I would greatly appreciate any type of feedback, thanks for your time.

Welcome. @Joseph D Chapman Investors don't pay retail (especially in hot markets.) We must find a deal that pays for itself through the income, one which pays its expenses and has a little left over. Income is generated by rent rates. Would your potential duplex do this? Skip the part about you're living there, for the analysis. Let the money talk. My first analysis is a 1% rule: if 1% of the purchase price represents the rental income, the deal is interesting. Example: Duplex in my area selling for $160,000. Would the monthly rental income bring in $1,600 in rent?  Learn your market. Some investors have appreciation in the analysis.  

Then, is there room for improvement? If upgrades, or improving the management, could increase the income, the deal is more interesting.  Your new build is already improved so repairs will be non-existant (one hopes) for years to come. Consider the mortgage payment, insurance, property tax and landlord expenses and see if the property can pay for itself, with a little left over.

With practice, come up with your own formula. No money down loans may have larger monthly payments. Find a balance of using the downpayment to make the montly payment manageable and having reserves. For me, this has been 25% downpayment.  Find your sweet spot.

I found the book, 'Duplexes, Triplexes, and Quads' by Larry Loftis very helpful.


The one thing I love about VA loans is the 100% financing and they are very protective of the borrower. However the one thing I am not a big fan of is the funding fee. If you look at the cost of the funding fee versus a conventional loan with a small down payment and NO PMI. Your closing costs are going to be lower. I typically will go over a loan cost comparison with all of my buyers to show a side by side payment and cost. VA usually has some great rates but the rate market right now is so neck and neck it may make more sense to go Traditional. I know as a Federal banker where we are Veteran owned its a great time for our Military Veterans to buy. So you are making the right move at the right time!

@Joseph D Chapman , by guess is that at $475k the numbers will be very difficult. Given you will be 100% leveraged, even more challenging. The upside is that with new build your maintenance and CapEx expenses should be very low. Share all of your numbers here and the community will help you with the analysis. This may still make a great house hack. You can lower your living expenses, build equity, and gain experience as a land lord. Just don't expect it will cash flow after you move out.