All Forum Posts by: Kyle Brown

Michael Rutkowski Yea that is why I am a little hesitant in pulling through with the deal. I could even try to offer lower than $107k but I would assume there would be slim chances it's gets accepted. Not much else is in my control. $900 in rent per unit would be pushing the limits in this area especially for 1 bd 1 bath units. Regardless, my first year will cost me the balance every month.

Ok great, thanks for the feedback, I will update my numbers and repost to see if they make better sense then.  

Hello,

I am close to purchasing my first duplex in South Jersey and am looking to see if anyone is or has been in the same situation.  It is a 2 unit 1 bedroom 1 bath each.  Unit 1 currently rents for $700/month, Unit 2 currently rents for $725/month.  There are minor repairs and definitely updates I would like to do, but no major issues. 

I will be purchasing this with FHA 3.5% down at about a 4% interest rate. It is listed at $132,900, but I will be making an offer around $107,000. The total monthly mortgage for the property including taxes and homeowners insurance is $1103.04/month. If my offer does get accepted, I will only be getting income from the one Unit 1 $700 for the first year, which will cause me to have a negative cash flow. I will be paying the balance which would be $403/month. Once the second year comes and I can rent out the second unit, I will be cash flow positive with $321.96/month.

I would most likely raise rent to $800 and $850 once all tenant contracts are up, but to be conservative, I used the current numbers.  My question is, is it worth it to suck up the negative cash flow for a year and have to put out the extra money to pay the mortgage for a long term positive cash flow duplex?  

@Justin Eaton Thanks for the book recommendation, I will definitely make an effort to read that one. It makes perfect sense to only put 3.5% down, my thought process was that it would lower my mortgage payment, but you're right it wouldn't be by anything substantial. The property is in Palmyra.

Ok great, thanks for the feedback. I must have had the wrong understanding of ROI, but it is great to know it does not mean much for rentals. One of my biggest concerns is the first year and the amount of money I will have to put out until I can rent out the second unit, but once I can do that, Ill have positive cash flow.

Hi Everyone,

I have been analyzing a duplex I am very interested in and I think I am at that point where I have "analysis paralysis" and am looking for some feedback and advice. This will be my first investment property. The duplex is in South Jersey listed at $132,900, taxes around $5,356. I will be using FHA to purchase this so minimal 3.5% down. FHA also means I have to occupy the property for a year before I can rent out the second unit. So, with that being said, my goal is to have a ROI of 10%+ and a positive cash flow. These units can be rented out for easily $800/month.

Year 1- If I can purchase the duplex for $110,000, put 6% down, charge $800 in rent for the first year for one of the units, I will have a 9% ROI but not a positive cash flow.

Year 2- Once I am legally allowed to rent out the second unit, I will have a cash flow of about $415 a month and a ROI of 17%.

These numbers do not meet the 2% rule.  Please let me know your opinion, advice, or anything you may see that is not correct, that can help me out.  All feedback is appreciated!

I want to be a Wholesaler to start out, but I am iffy as to what I need to have in place before contacting buyers.  I am fine with finding properties, but I want to make sure I have everything I need to complete the transaction.  Is it best to discuss this with the realtor? 

@Upen Patel Yes, of course. So since my budget is in the range of properties that will need some work, so real estate agents have told me that since the house is not in "livable conditions" it cannot be purchased with FHA.

The mortgage officers have been trying to work with my financials to find a way to squeeze out as much money as they can to raise my budget to be able to purchase a property that is in better livable conditions so I can use FHA. I know I am going to have to make repairs on whatever property I buy, its just finding the right property that will allow me to use FHA.

I am looking for my first property (preferably a duplex) and I have noticed it is tough finding properties that allow FHA financing in my price range. I am just starting out so my budget is in the $80-$115k range at most. Is there a better way to search for properties that offer financing through FHA or is it something you just have to find out through an agent?

I am looking to purchase my first property and I was wondering if other than the liability aspect, if it is necessary to register as an LLC? What are the other benefits of an LLC for an investor.