First property acquisition - duplex, FHA loan, house hacking

[Annika Neerdaels]

Hi Everyone,

I have been living in a duplex for a year now and am ready to acquire my first property. I am currently working with a local lender on getting pre-approved for a FHA loan. I am hoping to be approved by the end of the week. I have been checking out and analyzing several multi family properties with a realtor. Now, I do plan to house hack, as I would be required to, for the first year. Of the properties I've looked at, only one meets the 1% rule. It's a top and bottom duplex that is currently rented out until July. It's listed for 150,000, appraised for 153,000. It definitely has room for forced appreciation as kitchens and bathrooms need to be updated (appliances could use an update too). It's been in the market for 80 days. Unit one is 2 bed, 1 bath and is rented for 640 per month. Unit two is one bed, one bath and is rented for 580. Tenants pay utilities. I live just down the road from this duplex and I'm paying 980 for a two bedroom, one bath. The landlord lives in Florida and does not seem to be aware of the current rent rates. After looking at the numbers, I would have $52 cash flow per month while I house hack assuming I increase rent to 800. After I move out, cash flow increases to 570. This seems like a pretty good deal even if I acquire the property for the listed value. Comps in the area are around 165,000.

I would like to buy my second property with cash, but I’m not at a point in confidence or financially to do that now. Thoughts on this opportunity? Words of advice?

I can’t explain how great of a resource this community has been for me.

Annika