We have a couple of opportunities opening up, so I'd appreciate your advice about these:
1. Option 1--buy the other half of our duplex-- We currently live in a duplex, but we've been told that the other side of the duplex will be for sale this summer for around $450K. We currently owe $200K for our side. I know real estate is going crazy all over the country, and it is crazy here too. I ran the numbers, and we would be cash flowing around $600/month. My husband is worried that with both properties, our mortgages would be $730K if we used equity for the down payment, and that just seems like a lot to get into for a first deal. I know some people can house hack and have their whole mortgage covered, but that wouldn't be the case for us since prices are so high here. How do we save for CAP Ex and maintenance when not all of the umbrella mortgage would be covered by the tenants on the other half? How do you handle the split between the business and personal?
2. We have a friend who flips houses about 2 hours from here. He offered us a property that we could BRRR, but it has mold and hasn't been touched since 1980, so there is A LOT of work to take on. That seems like a lot to take on for us, especially when the property would be vacant for 5 months during the rehab, and we'd have to pay the mortgage. It would also be harder, but not impossible, to self manage a property that is a few hours away.
I know in REI, we are all in it for the long-term benefits; how do we know which will be best? It's great to have options, but it's also not really helping us take this first leap! Thanks for your help in advance!
@Gia LaForge can you post the calculations that are yielding $600 per month in cash flow? Based on the information you've provided that seems like a ton of cash to have tied up... but maybe there is something I'm missing.
Yes, thank you! I'd love help exposing anything I am not thinking of correctly!
1-Umbrella Mortgage payment=3,000 and Rent = 2,400
If we bought the property with the umbrella mortgage, I don't think there is cash flow, but rent certainly would help pay our mortgage at a reduced rate.
2-Or we could use existing mortgage cash-out refi to cover down payment of the other side, so just thinking of the numbers a different way.
Mortgage 1 payment-$1,400 and Mortgage 2 payment-$1,600 with rental income $2,400.
The property is 15 years old. Other comps are selling for over 1 million in about 2 days, so we would have immediate equity as well as an exit strategy. Obviously we should have bought the other side in 2016 when it was listed for 260K! Thank you for your help!
@Gia LaForge are you saying one side of the duplex would rent for $2400, and your mortgage would be $3000? There are lots of other costs to factor in, so you would be spending more than $600 a month to cover everything. Would your side also rent for $2400 if / when you moved out?
And, does your side have the same features and layout that would comp it with the others? It still seems to me like doing this would tie up a ton of your cash for a low return. What's the total cash you would have invested - down payment on your side from when you purchased, plus $90K to $115K for the other side? Only you can decide what to do, but I think most folks on BP would say, there better ways to use that much cash than in what sounds like a very high end house hack.