Is a $200,000 duplex worth it for my first investment?

Question

Hello all, I have been lurking for a couple of weeks and finally posting for the first time. I am looking at getting a 200k duplex in a good neighborhood and wondering if it's a good first investment. One is a 2br and the other unit is a 1br. Combined they could rent for 2k.  A lot of people live by the 2% rule here but I'm having a very very hard time finding a property that could rent for that much. I would be putting 25% down and my mortgage would be around 1000 per month. I could also use an FHA loan and love in half of it but my monthly payment would be 1400

Dennis M. · Answer

@Tarik Hodzic

Deal sucks . Don’t do it

Timothy G. · Answer

That's a little tight in my opinion.  When the property is vacant, how do you go about paying the mortgage?  Shop around for insurance.  Should be able to get something closer to $700.

A deal like that would get your foot in the door but I always look for value add properties.  Something I can turn into a three bedroom or something that can be fixed up where the rent can be increase by 30% or more.

Without seeing pictures or knowing its location, It doesn't sound like a deal that would net you very much money and might not be worth your time but I've seen no so good deals turn into wise investments in the long run.  Especially if you can rent it out for a few years and then leverage the equity to buy something else.  More than likely, you won't be "stuck" with a deal like that but you might not walk away with enough money to make it worth your time and it could seriously make you not want to get into the rental business again.  Just my 2¢.

Don't get caught up in having such a desire to do something that you end up regretting your decision later.  Make sure the numbers work for your situation.  If your comfortable with the worst case and can get back on your feet and move forward then go for it.  It's a personal and financial choice that you ultimately have to make on your own.

Just looking at the basics and the information we have though, I would probably give a polite thumbs down to the deal.

Tchaka Owen · Answer

Agree with Dennis. I'm not even seeing 1%, let alone 2%.

Tarik Hodzic · Answer

Hey thanks for the response. Here is some more information.  There is no further work needed on the house.  It is in good condition with recent renovations.  The water heaters, furnace, and roof are all brand new.  The total rent equals $1550.  The 1 br rents for 750 while the 2br rents for 800.  I would be managing the building so the management expenses would be $0? I am not quite sure how to estimate capex.  Mortgage including taxes is $1100 at an apr of 5.24%.  Home insurance I am estimating around $1000 per year.

Satha Palani · Answer

@Tarik Hodzic

. Based on your post I am assuming the return will not meet the 2 % rule. A lot of that has to do with what assumptions you are making . If you provide more details ( estimated rents per unit, monthly mortgage,management expenses, capex reserve, utilities, taxes , insurance etc) folks on here will be able to give you better feedback

Is a $200,000 duplex worth it for my first investment?

Most Popular Reply