Owner Occupied Duplex - Real World Situation - Can't Really Template

[Patrick Nickell]

Hi everyone. I am new here so please be gentle. I have been doing a TON of research and am new to the world of real estate investing. I have consumed a ridiculous amount of information and at this point everything is hypothetical. I will be buying a multi-family property somewhere in Western Washington (NOT Seattle and probably not Snohomish or Pierce Counties either) in Nov/Dec 2023.

I ran things through the calculator and knew that things weren't going to look good as I will be living in one of the units. I am currently talking to an accountant and attorney about forming an S Corp and renting to myself as a way to possibly get a better go of things from a year-end tax perspective. This is really a separate issue but chime in if you are familiar with Washington State.

I am looking at a property that is $285K and for this example let's say I won't negotiate that down. I will show all my math below.

Mortgage @ 7.22% (P&I, Escrow, MIP) - $2234

Rental Income - $1650

Vacancy - $165

Repairs - $165

Cap Ex - $165

Monthly Cash Flow $-1,079

I will be handling my own property management since I live on-site.

So obviously a bad deal on paper but here’s the lens I view it through:

Seattle Rent I currently pay: $1295

Rental Income: $1,650

Total Monthly Expense on Duplex: $2,729

My old rent I was paying + New Rental Income -Total Monthly Expenses = + $216 Monthly Cash Flow

Ideally when I am ready to buy the rate will be lower than 7.22% or I will just refinance when it is or when my very trusted lender & broker recommends.

My long-term plan is to live in this duplex for 1-2 years and make improvements that will add to future rental value. I am not looking to flip. I really want to build up a rental portfolio that will eventually replace my income and more. I am VERY well versed in slow, and strong growth (aka grinding). A deal doesn’t have to be perfect on paper for me as my metric is what my current reality is versus what I know that it can be.

I welcome your sage advice, thoughts, and ideas. Thank you for sharing your valuable time!