Newb Reality Check

[Brittney Lynn]

Hi Guys!

I am looking to break into the world of home ownership very soon and have a few questions.

I currently live rent free (woohoo) at my moms house on Long Island. Prior to that I was living in NYC and paying $1700 on a tiny one bedroom.

I know that everyone talks about cash flow here on Bigger Pockets but am I crazy for just wanting to pay as little as possible to live in this great city?

As I am sure you know, it is very hard to find a cash flowing property in New York City that is not in a sketch area. I have been looking in decent areas but cannot find anything that will cash flow at the BP golden ratio of $100/door.

I am also not yet ready to leave this city so my plan is this:

Find a duplex, live in one side and rent out the other. The numbers I am about to quote are just generally what I am finding but as an example:

House is $500,000

Principal & Interest is $2200

Each unit rents for $1500 so that would be $3000 per month. Applying the good ol' 50% rule I can expect to collect $1500/month. Now because I am living in one of the units lets halve that to $750 in collected rents per month.

If I now subtract the rental income from my principal and interest payment

$2200-750, I am left with a payment out of pocket of $1450. To all the investors out there this is bad because it is essentially negative cash flow.

The way that I look at it is when I was renting, I was paying $1700 a month to rent. If I buy a duplex, I am essentially only paying $1450 in 'rent' and at the same time building equity and hoping the property appreciates, raise rents etc.

Further down the line, I would eventually leave this property or sell it, or continue to live in it to pay 'cheap rent' in NYC and buy something out of state that does in fact cash flow but for my first property I think my goal is to simply pay less than I would pay if I was renting.

This would be my first property and at the same time I am VERY anxious to get out of my moms house!

Am I nuts for looking at it like this?

Thank you!!!