Deal or No Deal? Duplex Primary Residence

[Rachel Felder]

Considering buying a duplex as primary residence. Cost is $220K. Putting 3.5% down for FHA. Mortgage which includes PMI insurance, taxes, house insurance, principal, and interest is $1,570. Rent for one unit is $900. So $1800 when we're no longer living there. Deal or no deal?

[Peter K.]

There are many other factors to consider- looks like you haven't factored in Vacancy, repairs, CapEx, Property Management fees (once you move out as primary residence- unless you're willing to manage it yourself) which eats into your overall cost of Investment/ownership- from the numbers you gave it seems like you'd be at a negative cash flow if you factor all these in.

A quick rule of thumb: with the Purchase price being $220K and rent being $1800/month, it doesn't even meet the 1% rule , if it were to be rented for 1% (220K x 0.01= $2200/month), it would most likely work out for you but this doesn't seem like the numbers work.

Long story short, no deal- unless you can raise the rent and/or lower your PITI.