Dear Bigger Pockets.
Im a W-2 employee two years out of college living in the Midwest. This year I was finally ready to beat analysis paralysis and start investing. However I’m at a dilemma.
1. I will be house hacking (I close next week) a SFH (B-) with a personal loan , and moving in two years. 10% Down
2. Just got in contract for a duplex (B-) under my LLC with 20% Down , property is ~140k after repairs. (Meets 1% rule)
An opportunity presented to possibly buy a side by side duplex in a B+ neighborhood in a nearby town
Price is 220k , but would need most likely a 240k-250k offer to be competitive. This property would not give me the 1% rule, but it would be an appreciation play. Both sides can be rented for $1800 per month and would cash flow $400 after management fees. My fear with this crazy market is overpaying for a property this much.
Also I would want to buy it under my LLC but paying 20% down would deplete my savings , so I'd have to buy it on the personal side with 10% so that I can retain some cash.
What you keep looking ?
Do you prefer cheaper properties that appreciate less but do meet the 1% ?
@Jorge Hernandez The 1% rule is a guideline, if it will cashflow 400/month, it seems like a no brainer. And finance it in your name then deed it over to your LLC. If you keep making the payments, the lender won't care that you put it in your own LLC.
Perfect, Thank you so much for he feedback!
I'm in the same situation. Trying to decide between a:
1) cheap, no appreciation property that meets the 2% rule - $350 cash flow
2) expensive, high appreciation property that is only 0.5% rule - $350 cash flow, and will deplete my savings.
For me, I made the decision to go for the cheaper place to get the higher Cash-on-Cash ROI (CoCROI), especially if your just starting out and need the cash to purchase more properties.
@Jorge Hernandez I would not recommend overpaying or depleting your savings for a purchase that is an appreciation play. I say go for the property that has better cash flow numbers and fits more comfortably in your savings. Any appreciation from there is icing on the cake.
Not an easy decision but I'd vote for going with cash flow and keep some reserves in the bank. A true B- location is a pretty decent balance. Appreciation is a game I'd play after I've "made it" with cash flow.