A duplex in Portland, good deal?

[Melony Ochieng]

I just put in an offer of $463,000 in Portland. This 3 bedroom 2.5 bathroom duplex with 1276 sq.ft each unit built in the year 2000. One car detached garage for each unit however there is a fire hydrant in front of the house so limited on street parking. Currently both units are rented for ~$1400. I will be using an FHA loan so 3.5% down. Would you consider this a good deal?

[James Bradin]

Just doing some quick running of your numbers I would say strictly as an investment property, it is not a great deal.  At a $463,000 purchase price with a monthly rental income of $2800 (assuming you were saying $1.4k per unit) you are significantly below the "1% rule".  Your mortgage payment is probably going to be close to $2,200 a month, and when you add in insurance, taxes, maintenance, cap ex, property management, and utilities, it may be hard to break even.  I do not plan to count on appreciation when analyzing properties/ 

However by using an FHA loan I am assuming that you are going to be house hacking for a year. If that is the case I would ask the following questions, if the answer is yes to any of these, than it is probably a good deal:

1.  Is your rent/current mortgage payment decreasing by house hacking?

2. Is there potential to do a live in BRRRR, fixing up the property yourself to increase the rent to more favorable rents when you move on to your next property?

3. Are there no SFH's in the area with better numbers for a BRRRR?

I am a huge proponent of house hacking small multifamilies, I am under contract on my 2nd duplex, after house hacking the other for 4 years.  I treat them as rental properties during analysis and ensure that once I move out, it will still cashflow.  This can be difficult in today's economy and real estate market (especially expensive markets).  I hope that this helps.