Hi! I just bought my first duplex as a househack and was wondering what you all thought about the deal so far!

Details:

Price: $197,500

Loan: 186,855

Mortgage: 1150

Interest rate: 2.875%

I live in one side and the other rents out for 750. I used an FHA loan and paid around $20,000 all in for the downpayment and everything else.

I didn’t know if I should have waited or if I screwed up with my numbers initially or if it was a good deal. I am living by myself and could live here or with my parents (really wanted to move out). My thought process is that I am saving around $300-400 per month because it would have cost a lot more to live by myself elsewhere, I receive $325 in equity each month and when I move out it will cashflow at least $100 per month after expenses but I don’t know if this is enough to cover me or not.

Thanks for the input!

@Brandon Castillo

Congrats, man!  Honestly, I can't imagine you'll ever regret buying that and I'd be shocked if it didn't provide a foundation for you to build quite a portfolio with over time.  Super exciting to see a young guy headed in the right direction.  Thanks for pumping me up!  haha.

Btw, I personally wouldn't worry too much about the numbers (they sound good already) as if you hold over time, you'll have appreciation of the value, depreciation and interest tax write offs, etc.  It's going to be great!

@Brandon Castillo generally anytime you can buy a property for love in one side and rent the other you’re off to a good start. Don’t stop there, start looking for your next deal. What area do you live in?

@mattwalker thanks! I’m looking in the Lexington, KY area

@Brandon Castillo It takes a lot of patience and time to find anything that meet the 1% rule in Lexington, KY. I am also looking to buy in the area. Regardless of how much you pay or collect in rent, you will always be ahead of your peers that buy single families all in the name of privacy and comfort because someone is paying down your mortgage. I wish you good luck in your next deal.

That is great I live in Lexington and did the same thing some 25 years ago or maybe longer and have been in real estate ever since.  My only regrets are the properties I did not buy.  

@Brandon Castillo Congrats on your first property! You should attach your analysis to this post. Your numbers will tell you if it's a good deal or not. 

Your monthly cashflow when you move out will be minimal, but your cash-on-cash return will be decent because you only had to put 5% down. 

Try finding properties that meet the 1% rule (monthly rent > 1% of purchase price) for better cashflow. 

@Brandon Castillo

I don't think you'll cash flow when you account for 30% of rent collected going to reserves and property management (based on estimates I use). $1500 rent minus 30% reserves (-$450), minus mortgage (-$1150) leaves you with (-$100) in monthly cash flow. Hopefully you have a cushion saved up for any potential Capex issues early on. As mentioned previously try to aim for the 1% rule, with a $197k purchase price, you'd want $1970 in gross rent.

All that being said, kudos on your first property, much better to get your primary mortgage subsidized by a tenant than you pay 100% out of your pocket. I wish I would have done what you did starting out. Congratulating to your continued success.

@Brandon Castillo House hacking is a great way to get started. Even if you got a mediocre deal it is better than throwing away rent and a good way to get your feet wet in the real estate investing space. Lexington is a fast growing and appreciating market so holding on to a property like that is going to pay off in the long run.

Hi @Brandon Castillo - Greetings from Gratz Park in Downtown Lexington. Congrats on your first property! Honestly, I'd be less worried about getting a good deal and more pumped that you took action and are learning! At the end of the day you need a place to live and you're getting a significant portion of your note paid for. Most importantly, make sure you're diligent with that extra $300-$400 a month as it's easy for it to feel like discretionary income that can be spent. Best of luck to you!

Sounds like a win in my book. Now concentrate on improving the rent on the other unit, and stockpiling for the next buy. T

Thank you to everyone who responded, I appreciate all the feedback and will definitely try to increase the rent going forward!

You're on your way @Brandon Castillo ! A house hack is a fantastic start and you'll be miles ahead of the game by doing that alone. As other's have said - using the 1% rule is a good barometer for a great deal in most cases. Lexington is a competitive market for investors. Kudos for getting a deal that most certainly will pay you in appreciation - even if the cash flow may not be substantial at the get-go. Rents will go up over time and so will the value of the property. 

That's awesome @Brandon Castillo !  Sounds like you had a good agent!