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Updated almost 12 years ago,
Cheap dulpexes in rent-able condition. Possible bad tenants. (and other issues)
Hi,
This past six months I've saved 10Gs to begin real estate investing, but since I'm new to investing I need some sound advice on some questions I've asked myself while considering what to buy.
A little about me:
Up front, I want to say I haven't been pre-approved for any loans yet. (I will be doing that next week.) I've also put a $80,000 limit to my investment endeavor. I'm willing to be flexible on this number, but I want to be able to pay the mortgage if I can't rent. I'm also interested in buying a du/tri/quadplex. I live in Richmond VA. I don't want to buy any type of plex unless it is in rent-able condition or very very close to rent-able condition. This doesn't seem to be impossible because of the market right now. I want to buy and sell in tops 5 years as the market returns.
My though process:
Initially, I thought I would buy a duplex. Live in one side and rent the other. The tenant on the other side would essentially be paying off the mortgage of the house. However, in Richmond VA all the duplex properties that are in an okay/average area go for $120,000 or more. Let say I buy this property live in one side and rent the other for $700 (much like the scenario above). This means I will be making $8,400 a year from a renter. If all the money went into the mortgage (I know it won't) you are looking at at least 16 years to pay off the mortgage. My gut tells me but it's in a decent area. Property value will go up in 5 years. Maybe it's worth it to buy and sell in 5 years.
I know Zillow isn't very reputable, but for the sake for example here is a link.
http://www.zillow.com/homedetails/2500-North-Ave-Richmond-VA-23222/12527179_zpid/
Second, I thought of Petersburg VA that's about 45 minutes away. I found 3 duplexes (some need a little work) for real cheap.
http://homes.richmond.com/residential/1217119/ $37,400
http://homes.richmond.com/reside/1217118ntial/1224733/ $30,000
http://homes.richmond.com/residential/ $37,400
That's 6 units. One building has tenants that want to stay. I would rent for $500. Which would be $3,000 a month (if all are rented) or $36,000 a year. Oh what? $36,000 pays off one building. I know this is the best scenario, not the worst , but I seems I could pay off all 3 of these properties in 4 to 5 years, which is very very appealing. After I make my 10% down payment back. I sell for $5,000 over (hopefully more if market rebounds) I walk away with quite a bit a change.
Potential drawbacks I see are that these buildings are in an area that is not the greatest and the tenants would probably not be the best. (I will do a background, employment, and credit check.)
To the bigger pockets forum. I'm new to investing. If my train of thought is wrong. Please, correct it. Please, give me advice. I want to learn.
**Currently reading: Investing in Duplexes, Triplexes, & Quads (Larry B. Loftis, Esq.)
http://www.amazon.com/Investing-Duplexes-Triplexes-Quads-Fastest/dp/1419537253
Got a better book for what I'm doing. Tell me!