Looking at Duplex but is this a good move?

Question

I need to move out of my apartment by November.  It's a problem that gives me room to do my first investment.  I found a duplex that is FULLY rented now, top and bottom floor.  Owner is willing to sell contingent on top floor being vacant beause I want the top floor, and tenant lease is almost up.  I am paying $1400/mo rent now and could be paying a mortgage.  Though, it is a small place, I'd have to sell my furniture (more cash, hello!), it will give me the rent from downstairs to pay the mortgage.  The rent is about $650/per apt, house asking is $135000.  My concerns:  1) should I leave both tenants in there, and find another place of my own? or 2) should I take the upstairs, and if I do, what are some things to consider?

Im not prepared for both apts to be vacated since I just started a new job, have nontraditional income, and need that security.  The seller wont do seller financing, so if I want this, I have to be very CREATIVE, find a no/little money down option, or other financing.

The duplex is small, in a single family home area, total house sq footage is about 1050.  However, it is just 2 miles from the beach, great vacation rental potential down the line.

Any thoughts appreciated! Thank you!

Mary Ann · Answer

Frank Romine  Thanks for the wise words, yes, definitely will keep that in mind!

Darrin Carey · Answer

@Mary Ann

Most, if not all, Hard Money lenders don't lend to owner occupants.

Depends on the neighborhood values, the SFH conversion could generate a nice return when you sell or give you your own SFH when you're ready. In the meantime, the tenant helps pay the bills.

Good Fortune!

Mary Ann · Answer

Looks like I may get hard money, unless I wait a few more months to get the income from my new job on paper.  Funny you mentioned SFH, alot of people checking out the place want to turn it back into a SFH, I rather keep it as a duplex because I need a place to live.  But turning it back to a SFH is in the plan, except there is a tenant that would need to be vacated before hand.

Mary Ann · Answer

Yes, this would definitely set a good foundation for me, this or better property.

Mary Ann · Answer

Looks like I only qualify for hard money on this purchase, gonna keep trying! I've never used hard money before. Is this good/bad?

Darrin Carey · Answer

@Mary Ann

Going owner occupied on a 2-4 unit is a great way to get started. @April Littleton is working on that now, and she is going to do well.

Anytime you're looking at a property, It's the expense's that aren't shown that always concern me. Especially if you have little to no reserves.

if you get traditional financing, will you be required to also get Flood insurance? If so, that can be a huge expenses.

Waht deferred maintenance is there, or items nearing end of life? Roof, Air Conditioner, etc?

There is a potential opportunity also. If you converted the property back to a single family at a later date, how would that impact the value?

Tatum F. · Answer

@Mary Ann #2 all the way depending on the financing. You may find traditional financing easier when it is your primary residence.  Also don't forget to stay true to your life goals which real estate investing should be supporting.  Ask yourself how will this impact my 2015 goals and will it lay the foundation for my  2016 goals?

All the best and it's a good problem to have. :)

April Littleton · Answer

Hi @Mary Ann I would suggest you read the article on how to analyze deals on here and then create your own spreadsheet in excel based off that article and do the numbers. Right now it looks like you would have a cashflow of $9245 but you are missing so many factors like you're going to be living in one of the units which is going to take away from that number also are you going to do repairs/maintenance if so you still need to put something in there for material if not you need to budget for that altogether which eats into that money. I'm in the same boat here in Dayton trying to house hack, once you run the numbers it makes it a whole lot easier. I hope this helps good luck.

Mary Ann · Answer

@Robert Curls I dont think they are separately metered but I will ask, its in Tampa.

Sounds like the consensus on here is that it's a good move but I should keep looking to be sure.  Except this is one of the most nicest duplexes Ive seen, where others have been pretty dumpy.  I have to figure out how to finance this without a trad loan or seller financing? I will be able to do this easier in a few months and will probably go do another walk through at the place soon.

Robert Curls · Answer

Hi @Mary Ann you mentioned utilities in the expenses.  What utilities?  Just water / trash? or does that include power / cable.  I know sometimes when single families are split like this they never become separately  metered.  This is something to consider as if / when you move out and do have two tenants in there this can eat up your profits.  Also, I'd look to see if this property is zoned for multi-family or single family residential.

Last thing, I'm in Pinellas, is this in Tampa proper? Just curious.