[Calc Review] First House Hack QUAD w/VA Loan

[Michael B.]

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

Help me with my first house hack, please! 

1950s Quadplex, All 2BR/1BA Aprox 800sqft, 1 Vacant/3 Rented $1050 Mon2Mon, Electric Separate, Nat Gas 1meter/2units, Offer $370k, VA Fund Fee 2.3%, 2.875% 0 down

Disc: Duplex property (Maryland Suburb) Each side of the duplex is split into A-Upstairs, B downstairs. 4 Units, each 2 BR, 1 Bath fully rented @$1050 per month. Large corner lot with 6 storage sheds. Dual metered Gas and 4 metered Elec. Tenants are long term and on month to month leases. Units have been rehabbed and modernized.

[Bryan Noth]

@Michael B. you allocated decent numbers for expenses, as long as those are on par for your market it looks good

[Michael B.]

Thanks for taking a look @Bryan Noth! My agent is advising me to make a higher offer, at least $2500 more. I understand that market conditions, like low inventory, are creating what appears to be a multiple offer situation, which is making me nervous. I do not want to overpay for any deal, especially my first. I did the calc based on all units being rented; of course, I'll be occupying one.

[Russell Brazil]

I looked up the property.....tax records indicate it is a 1 unit property.  Though the tax records are not 100% accurate on this subject, they are about 90-95% right, so this property is likely an illegal multifamily. If you do pursue it, make sure you confirm with the county that the use is legal.

[Michael B.]

Thanks for the advice @Russell Brazil! I really appreciate it. I directly asked the seller's agent if it was legally converted to a 4-unit, which he confirmed of course. But, as you said, I understand this needs to be verified. I have a home inspection contingency in the offer, which may give me time to obtain the information from the county. As I'm sure you are aware, these multifamily properties are scarce, so my timing from analysis to offer may not be fast enough. The last thing I want to do is get burned, and would rather miss out and try again on the next deal.

[Michael B.]

So, it's a competitive situation, multiple offers. I'm financing with a VA loan and the offer is contingent on a home inspection. The seller's agent told my agent that he has conventional offers and is going to advise his client to take one of those to avoid the VA appraisal. My agent suggested that we amend the offer to conventional financing in order to get the offer accepted then change the financing to VA afterwards. My agent says the only risk is that if the appraisal comes back with issues, we would have to fix them in order close the deal, which would mean the seller would have to allow us to make any identified repairs. So, if the seller declines to allow the items from the VA appraisal to be repaired to close the deal then my financing would fall through and I would not lose my deposit. I also would be able to walk away at the home inspection and retain my deposit if there is apparent issues. Does anyone know if this is a common practice? I'm concerned about losing my deposit or being forced to follow through with the conventional financing.

[Stephen Kehoe]

If you confirm if Russell's issue is a non issue it seems unwise to miss out on the deal for the sake of $2500. A house hack will save you so much money that if you miss moving into one by a month or two it will cost you that much. Realtors talk and he/she might know $2500 is the magic number. Plus since it's going to be your personal residence ideally there are personal reasons why it's best for you and worth that $2500. Eg it's close to work or a bike path.

[Michael B.]

I tend to agree with you, @Stephen Kehoe. Thank you for the advice! I'm not at all sure of what the magic number is in this case, but I'm aware of what you're referencing with "magic" numbers. The seller was asking $360k and I offered $370k. Comps, though few and far between, are $360.5k, $394k, and $330k (duplex). As for the personal benefits, it offers no real advantage other than financial.

[Matthew Maynard]

@Michael Burriss Have you considered also making extra income by potentially renting out the storage sheds? Depending on the size of them you could pocket a little extra money each month from those.