2 single family homes, should I buy?

[April Causapin]

Hello all! I’ve been looking for a property the past year. The last few have not panned out well but this time I found one that I truly like. There’s 2 homes, front is 2bed/1bath. Back 1 bed/bath. It’s been on the market since June and was listed at 588k. Last Friday, over the course of the past few months of reduction in price, 568, 548 respectively, it was listed at 499k. I looked at it yesterday with a contractor and he said it would take about 50-80k to rehab the place. I plan to live in the front unit but If I plan to rent it, it will rent for $1700, back house needs some update and would rent for $1300-1400. Seller will not do any repairs, looks like it would need roof to be done too so that’s extra 5k.  what would be a good offer for this place?  Would 460k be a good offer on this place? Planning to put 10% down and slowly rehab the front but definitely get the back ready for rental right away. 

At 460k 

Expenses would be 2,771 including mortgage, interest, PMI, taxes, trash, water, sewer, property manager, repairs, cap expense, vacancy rate while I live in the front house. Hoping to rent the back house for 1,400 which is the average based on rentometer.

Rehab and repairs- I’m going to stick to 60k. 
downpayment: 46000

Closing cost: 9,200. 

What do you guys think? It’s about 36 miles from Los Angeles. Last comparable I saw was sold for 580,000 on Oct 2019 but it was already all fixed up nothing to do. They listed it at 595 but sold at 580. 

Would love any opionion

[Jon Schwartz]

Originally posted by @April Causapin:

Hello all! I’ve been looking for a property the past year. The last few have not panned out well but this time I found one that I truly like. There’s 2 homes, front is 2bed/1bath. Back 1 bed/bath. It’s been on the market since June and was listed at 588k. Last Friday, over the course of the past few months of reduction in price, 568, 548 respectively, it was listed at 499k. I looked at it yesterday with a contractor and he said it would take about 50-80k to rehab the place. I plan to live in the front unit but If I plan to rent it, it will rent for $1700, back house needs some update and would rent for $1300-1400. Seller will not do any repairs, looks like it would need roof to be done too so that’s extra 5k.  what would be a good offer for this place?  Would 460k be a good offer on this place? Planning to put 10% down and slowly rehab the front but definitely get the back ready for rental right away. 

At 460k 

Expenses would be 2,771 including mortgage, interest, PMI, taxes, trash, water, sewer, property manager, repairs, cap expense, vacancy rate while I live in the front house. Hoping to rent the back house for 1,400 which is the average based on rentometer.

Rehab and repairs- I’m going to stick to 60k. 
downpayment: 46000

Closing cost: 9,200. 

What do you guys think? It’s about 36 miles from Los Angeles. Last comparable I saw was sold for 580,000 on Oct 2019 but it was already all fixed up nothing to do. They listed it at 595 but sold at 580. 

Would love any opionion

Hey April!

Not a bad LA deal.

Expenses, including reserves, are $2771 and rental income on the back unit is $1400, so you out-of-pocket while you live there is $1371/month. Cheap living! With rent on both units being $3100, you could move out anytime and cashflow $300+ per month.

If your comps are good, that means you'll be paying $60K to add $80K of value to the property. That's very good! It's not enough margin for a flipper, but it's positive equity that you're creating.

If looks like your total investment is going to be around $115K. Your cash-on-cash if you were to rent this property from day 1 is a little over 3%. Honestly, that's not bad for LA.

Are both units vacant now? Do you really like the neighborhood?

I'm going to message you. I finished my househacker calculator, and I think you'll it.

Best,

Jon