Newbie, Duplex, to buy or not to buy...?

[Tajh Walker]

Hello BP,

So I have been anxious to pull the trigger on my first deal for some time now. I’d like some advice or even some experiences given my situation. The property details are explained below.

I reside in SD California looking to invest in a rental property in the Inland Empire area. The property is in the Inland Empire, Eastern Riverside County.

• $150,000 (asking price)
• Multifamily Duplex
• 2 bed, 2 bath ea. Unit
• 1474 sq. ft.
• 7,405 lot sq. ft.
• built in 1950

Renovations:

• new interior and exterior paint
• dual panned windows.
• hard wood floors
• “Well maintained” (haven’t viewed property yet)

I will be using an FHA loan from a private lender to finance the property and would like to get a personal loan from the bank to finance the money down. I would like to have no money down. Both units are occupied and the owner just signed a new yearlong lease for both units. The rents total less than 1% of the asking price (~.85%). Not too sexy if you ask me.

The numbers don't look that good according to the 1% rule and 50% rule. I believe it's due to the type of financing I am pursuing. My PITI, insurance, and taxes seem higher because of the financing I am choosing. However, my funds are limited and I don't have many other financing options. The appreciation seems good given the location of property and community potential. However, I do not want to bank on this given what I have heard regarding wise investments.

I hope this was enough information to get an idea of what I’m working with. If not please ask for more. My question is this, is this a wise investment given the property information, financing, potential cash flow, ect.? WHAT ARE YOUR THOUGHTS?

My hope is to improve the value of the property over time as an on site landlord as well as gradually increase the rent to increase cash flow potential. Unfortunately, the numbers seem like I won’t be in a positive cash flow situation during the term of the current tenants lease (1 year).  Seems like I may have to contribute slightly to compensate until I can increase the rents or gain some equity.  Is it worth it...?  Is my finance option wise given my situation?