Buying my first duplex, confirming my numbers

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Hey guys. First time home buyer with a young family looking for a multi family home financed with an owner occupied FHA loan (Maybe 203K). I've lived in South Florida for 4 years so I have a decent understanding of the area, but I'm not from here and still have lots to learn about the market I'm living/investing in. But my post is mainly about checking my numbers and expectations for what/where I can afford. I would love your input!

By nature I'm very conservative with money bordering on ridiculousness so please forgive me when I play that out down this post. I'm not looking to break the bank with my first investment, I think I'm pretty realistic. I'm looking to buy and hold and make passive money that adds up over the years. My main goal is to purchase a second duplex and continue on as much as I can so I'm really just looking to not make a mistake out of the gate. I'll be as patient as it takes.

I realize I'll likely not cash flow in that first year since I'll be living there, but once I move out I'd be happy with just a few thousand dollars profit a year when comparing only my mortgage against my income from tenants.

But I want to ask the question, what is a reasonable cash flow to shoot for on a duplex once both units are filled...in terms of percentages? I figure each market is different so I really would love if some of you with experience in South Florida could give your opinions on that.

From my research, I'm seeing 300K on a Duplex in Broward (Davie, Cooper City, Weston, good parts of FTL & Hollywood) is the bare minimum I could expect to pay for a decent duplex. At that price point, it seems I could get anywhere from 1100 - 1500 per unit in rent.

With 4% down, I'm estimating that would be about a 1300 mortgage + taxes and insurance which I'll add up to 2000 each month as a payment. So on the low end the income would be 2200 and high end 3000 in rent. This works for me, but doesn't get me excited on the low end. I'm aware of the 50% rule but that seems hard to expect on a Duplex in this market. Please poke holes in my numbers/logic where you see them, that is the help I'm asking for!

I'm not sure of how much I can extend myself beyond 350K on a duplex considering my finances. I keep a tight budget and expect to have no less than 20k set aside for a down payment by the summer of 2018 when I'll be ready to buy. So obviously I'm in need of an FHA loan. Between my wife and I we bring in just over 7K a month in cash for about 84K a year. These numbers likely will go up over the next few years, but not drastically, and I want to assume they stay there for conservative reasons. We both have credit over 700 and have no debt. We get by comfortably each month paying rent of 1500 each month in a condo in Sunny Isles, saving over 2K a month.

So please let me know if I'm seeing the right things or if I'm way off track. I just learned about BP podcasts a couple months ago and everything seems so logical and realistic. I don't see why i can't do this. Seems like a no brainier to buy a duplex as a first home purchase so I'm trying to make this happen. In the future I hope to meet up with you guys and network a little. I appreciate you guys reading this!

[Adam Schooley]

You're on the right track! I personally house hacked a duplex in 2014-2015. Your numbers are little off though. For an FHA loan you need to put down 3.5%. Just the mortgage alone on $300k w/ your downpayment and rate of 4.25% would be around $1425.00 a month and thats not including the PMI you will have to pay because you are not putting down 20%. I believe that your monthly payment would be closer to $2,200-$2,400 all in. Don't forget closing costs run about 3-4%. Some of the areas you mentioned have no multi-family properties or very few. Weston, Cooper City, and Davie have very few duplexes. You would be better off concentrating on Hollywood, Fort Lauderdale, and Pompano for more inventory. You mentioned you have family. There are hardly any multi-family properties in good school zones. I'm not sure how old your kids are but that was a big factor for me as I have kids in school. Another thing to note is that you do not get 100% homestead exception when you house hack a multi-family property. You can only homestead the part that you live in which will be a factor for your monthly cash flow. I.E. If you buy a duplex you can homestead 50% of the property. When you move out of the property you will lose it completely. Always do your numbers like you will not be living there and factor in 10% for management fees even if you will manage it yourself. There are deals out there you just have to be patient. Have your financing in place so that when you do find a deal you can put an offer on it right way. Most deals will be under contract within hours to a couple of days at the most. If you have any other questions feel free to send me a message.

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