Closing on property 3/16 - should I walk or close?

Question

I'm in the Finger Lakes region of New York (5 hours from NYC), reliant on tourism area and some manufacturing. I'm scheduled to sign paperwork on Monday to purchase the duplex. It'll be tight but I don't know if I'll end up with a job in 6-12 months. I'll start working my side hustles with urgency however, the virus and ensuing panic is now getting me worried I'll bite off more than I can chew.

Numbers - Purchase price $165,000; 123,000 @ 5%; $42k cash from HELOC currently at 3.25 but variable.

Unit a - currently rented at $625 (650 was in all the info from owner but has been corrected at final close. Unit b - $1000-1200 anticipated.

Nick Rutkowski · Answer

Does the duplex need work or is it turn key? Will tenants still be there or will you buy the place empty? As long as you have tenants in there, the house pays for itself then you're good.

Nick Rutkowski · Answer

Okay, well at least you don't need to repair and can move someone in quickly. Real estate is a good hedge for economic slowdowns, you'll get someone who can't afford a house or got effected by the economy and has to rent again. On the flip side, when the economy is doing well you'll have people who have better jobs and can afford your place. RE is a win-win either way the economy swings. I'd be more concerned about rental law and regulations in NY vs. the coronavirus effecting the finger lake region's rental market.

Maryanne Cameron · Answer

Thanks for the info and questions - I do have low debt and several months savings (which may come in handy unfortunately). I closed the deal Monday (3/13/20) sitting the appropriate social distance apart from the lawyers which was very strange to say the least. At that time NY was shutting down all government offices so I'm not entirely sure my paperwork has been recorded at the clerk's office. I was assured that was just a formality. I posted the property for rent on my personal social media that afternoon and had 5 interested parties, 2 of which are serious, both work in healthcare. I am now confident I will have rent coming in before my first mortgage payment is due.

Side note within two hours of signing the documents, handing over a check I received a text from the current in the 1br/1ba apt who said he had been furloughed 2 weeks and his partner's company had laid off 50% of their workforce (not her yet though).

Cameron Tope · Answer

I'm familiar with your concern. I had the same worry when oil prices dropped below $30bbl in 2015. But I continued to buy rentals and I'm glad I did.

Do you have a strong financial position - no or low credit card debt, low overhead each month, etc.? That will help you float the loan for awhile if you have to, but to be honest that note will be pretty small anyways.

Also, at those rent prices you'll always have tenants, especially in bad times.

Maryanne Cameron · Answer

It is turn key, the 1/1 unit is rented ($625/mo), the other is not. I shouldn't have a problem renting...or as of a month ago that's what I would have told you. The uncertainty and economic slowdown that's coming is concerning...which is stating the obvious.

Closing on property 3/16 - should I walk or close?

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