Duplex Analysis is it worth it???

Question

Would you do this deal? Why or why not?

Duplex (2 units), 3BR/2BR each Unit.

I am looking to live in one of the units, the other unit is already occupied by tenant @ $800 month.

Purchase Price: $138,000

Loan amount: $124,120  =  Will be using VA loan so no PMI

10% down ($13,800) @ 3.75% interest

Breaking down the analysis:

Rent collected: $800/month

P&I: $575/month

Tax & Insurance: $281/month

Total PITI: $856/month

Misc expenses:

Vacancy: $67/month (since it's one unit I'm accounting for

Repairs: $133/month

Capex: $128/month

Property Management (I'll mostly manage): $80/month

Total Misc-expenses: $408/month

----

Total PITI and Misc-expense: $1,264

Cash flow: (-)$464/month

My plan is to live in one of the rooms, rent out the other 2 (house hack) and hopefully collect $500/month from that (but looking at it passively, if I don't have roommates, then I'll be losing $464 month)

My goal was to buy a multi and live in one of the units and rent out the other units, hoping the other units would pay for my Mortgage so I can live practically free. But this isn't the case here, I'll be paying roughly $464/month to live in the unit unless I get roommates and house hack. It would be a great cash flow property if I moved out and rented both the units for $1600 total but that isn't likely at least for the first year as my primary residence.

I have a full-time job so I can pay $464/month but I don't know if it's worth all this? Share your thoughts.

Peter K. · Answer

@Brent Coombs

In that sense, I see your point. Thanks for your input!

Brent Coombs · Answer

Aren't you ALREADY paying (rent, somewhere)?  Derek's point was: If you would otherwise be paying $800/m to RENT, then this way you'd be "saving" $366/m off that. [Or, if you've already bought a primary - why move?]

If you're using the VA loan system to property-hop after each minimum time requirement, you should already be aware of how hard it is to "house hack" for FREE, given the difficulty of finding genuine bargains that also meet the VA's liveable condition requirement. (Of course, I'm not suggesting you're using this approach, but just raising it as a scenario). My 2c.

Scott Weaner · Answer

If you were renting out both units your cash-flow would be about $336/month, about 4K/year. By my possibly incorrect calculations that would amount to a 29% return on your investment. Of course, you can't use the VA loan without living there AFAIK.

Peter K. · Answer

@Derek E.

How am I "saving" $366/month. I would be paying. I don't usually factor in appreciation when I'm looking to purchase a property. I'm more of a buy-and-hold investor (long-term) that focuses on cash flow.

Derrick E. · Answer

You could also look at it as you are saving $336/month if you were to be renting the same place.

I would do it as long as it's a good location and you think it will appreciate.

Brent Coombs · Answer

@Peter Kim, Question #1: If you don't buy it, how much is your accommodation already costing you now?

Question #2: What do recently sold comps suggest that the market value of this duplex should be?

Question #3: Why is it that Investors haven't already snapped this one up?

Question #4: Does your gut suggest that you wait for a "better" 3 or 4-plex deal?

[Hint: If you feel you're being "forced" to pay market value, will you at least look for value-add opportunities?]

Thank you for your service. All the best...