I feel like I made a mistake

[Gerardo Hernandez]

Hello everyone, 

I have to say I am freaking out!! I got a new job over an hour away and I have been driving for over a month and I hate it! I have been trying to find a duplex to house hack but there isn't much in the market at the moment. Well yesterday I put an offer on a new duplex that came in the market. The asking price was 215k and I offered 190k to start the negotiations. My real estate agent came back and said someone else had an offer in already. So she said that houses are selling 10% above asking price and that if I truly wanted to get it to not ask them to pay closing cost. Under pressure I put an offer of 215k. Now that I am running the numbers. It just doesn't make sense. I am still waiting for an answer but I am super scared that I get it because I feel like that wasn't smart at all. Taxes were 4300 in 2019, current tenant pays 795. I feel like I can raise that to 900 or 950. I got a 3.25 percent interest with 3% down. Any advise? I feel like I really screwed up my first deal. 

[Brad L.]

General rule of thumb when analyzing is that gross rents should be at least 1% of purchase price. Even if you were to get $950 from the current tenant and if we assume $950 for your side at some point in the future, you're at 0.88% when looking at monthly mortgage, property taxes and insurance. This doesn't take into account repairs, general maintenance or capex which would push you lower than 0.88%. 

That being said, this all doesn't necessarily mean it's a bad deal for you; what is your goal with this property? Will you live here permanently? Do you intend to move out and rent your unit in the future? What would you be paying in rent elsewhere if you did not purchase this property, is this purchase reducing your living expenses? Do you see a good amount of appreciation in value in your area? Not a deal I'd do personally, but just because it doesn't fit my goals doesn't mean it won't fit yours.