First Deal - House Hack: Need Advice

[Trent Strang]

I finally pulled the trigger on my first duplex which is super exciting!!! (It’s been a long time coming). The duplex is in the surrounding Lansing area. I’m doing conventional owner occupied financing 5% down at 4.75%. I am housing hacking, which is what allowed me to put such little money down.

I am a newbie so I would love to hear your thoughts, comments, concerns (numbers posted below). One of the biggest battles I am going back and fourth with is to raise rents or not to raise rents on current tenant, if so, what is fair?

The current tenant is very clean, takes great care of her unit and has lived there 7 years. I bought it (and it was being rented) as a 2 bed 1 bath, which for this area can rent anywhere from $750-$850 depending on sq ft and condition. She is paying $700. Each side of the duplex technically is 3 bd 1 bath as their is a legal basement bedroom with egress window and meets other requirements to be a bedroom. As a 3bd 1 bath this should be renting for $850-$1,000 depending on condition. So again I would love to hear thoughts, comments, concerns on what you would do/have done with your units when taking over. Good tenants but low rent, how do you handle? Thank!

(Numbers are run as if both units are rented: one at current rent $700 one at market rent rates $850. Both units will be rented in the future)

Purchase Price: $117,500

Cash to Close (5% down): $5,875

Rent (current): $1,550

Tax: $378/mo (will go down w/owner occupied)

Ins: $100/mo

Mort: $582/mo

Pm (10%): $155/mo (self managed I will pocket)

Vac (7%): $110/mo

Repairs (5%): $75/mo

Cap X (7%): $110/mo

Total Expenses: $1,510/mo

Cash Flow/mo: (I added back in the PM expense to cash flow because I will self manage $1,705)

$1,705-$1,510=$195/mo

Cash on Cash ROI:

$2,340/$5,875= 40%