Buying my First Duplex and Need Some Help

[Darren McGillvrey]

I am closing on my first duplex this week and it's my first investment that has tenants. The previous owner didn't keep up with a lot of maintenance items and both tenants have been there 15+ years. The problem I'm having a hard time wrapping my mind around is: 1) Renters are hoarders, stuff everywhere. 2) I need to refi it soon (from Hard Money loan) and so I need to paint inside and out, maybe new flooring, etc.  3) Current rents from both sides total $1350/mo and current market value is $1800/mo. 

So, How do I do fix it up with all their Stuff? Should I just fix a few of the safety items and just raise their rates to $900 each side and see what happens? I'm buying for $195k and current market value is $235k. I think anyway I do it on a refi I'll probably have MI anyways. I also use a property manager for my rentals.

I hope my concerns make sense?

[Jon Holdman]

This doesn't seem like a good hard money/refi deal. When you refi, you're probably going to be looking at a max LTV of 80%, which is less than you're paying. So, you're going to have to put cash in when you do the refi. Plus interest on the hard money, and you're going to spend a lot to get the same loan you're getting when you refi. I assume your HML is not lending you 100% of the purchase price because you're at 82% of market value.

This plan (buy w/ hard money, rehab, rent, refi) only works if you're doing work on the property.   If you buy and don't do any work, the "value" on the refi is likely to be about what you paid.

I'd guess if you raise rents from $675 to $900 you won't have to worry about the tenants being in the way.  That's a 33% bump.