Tips for running numbers on a duplex

[Josh Donlan]

Hi, I have been looking at duplexes in my area (Peoria, IL) to house hack. I plan to live in one unit for a year or 2 and then move out and rent both sides. I’ve been running my numbers as if I were renting both sides to see if it is a good long term investment. I don’t have much cash available for a down payment so I got approved for a 3.5% down fha loan. I have been running my numbers with this 3.5% down and it is very hard to find a deal that hits my goal. My goal is to cash flow $100 on each side. This is much easier if I put down 20%. My question is should I run the numbers as if I were putting 20% down and try to pay the principal quickly and refinance to a conventional loan when I have 20% equity? Or should I continue to hunt for a cash flowing deal at 3.5% down?

[Michele Wax]

If you do a FHA loan you have to live in one and rent the other out. That would make it harder on you if you need to make 200 on the deal. But, it is a good option if you want to do that.

First things first, figure out what you want to do. Set your goals and strive for just them. Biggest block I see for REI investors starting out is the shinny penny. Oh look its a shinny penny...should I do that, let me research it and then decide or i don't know if I should...then another shinny penny ohhhh should i do that.....decide where you want to start and then how you want to go on.

A good plan is: I will start with a FHA loan on a duplex. Season it for 1 year refinance it and use the equity i have to buy another FHA. Once I have 4 doors this way I will start just buying houses through commercial loans and put them immediately into a LLC. For this plan I will give myself 5 years.

After 5 years, is where I should be able to start doing the commercial loans into an LLC.

A bad plan: I want to start investing and not sure how I want to build my wealth.