Im pretty sure this is a horrible deal, just help me to understand why

[Brandon Heath]

Hello BP!

First of all I am an EXTREME newb to any type of investing, so I apologize in advance for all the needless questions. I live in San Diego county and would like to try and purchase a small multi family in the next 12 months. I've been looking around and trying to get a grasp at maybe what I could be getting myself into. This property is just down the street from me and I cant get it off of my mind (dangerous emotion). So I thought it would be great to run numbers with all of you. I find myself trying to act like this would work and your job it to crush my dreams and save me from myself. 

The property is in Poway California, here is a link to the actual listing Click here. 

• Ranch Style Duplex
• Side by side 2/1
• Asking price $525,000
• Current Rent $1,500 and $1,600
• Rent Comps in the nearby area are $1400-$1600
• Metered separately for water and electric
• Taxes last year $3200
• I would plan to live owner occupant for a few years.

Now I'm almost positive that from this I see why everyone complains about investing in California. With these numbers I would have to put like 30% down just for it to make sense. I of course would looking for an FHA loan but with these numbers that's basically suicide!  Highly unlikely I would be ready for this deal anyways but i thought it would be great to learn what type of numbers I should be looking for. 

[Matt C.]

@Brandon Heath it may look terrible numbers wise and I am sure many people on here will tell you it is. Unfortunately not everyone can live in an area where you can buy a $60k duplex and have your tenant cover your whole mortgage. This certainly wouldn't be one of those cases without a hefty down payment. However, keep in mind that Poway is very expensive and decent SFRs sell for $500k+ and if you have to live somewhere you might as well have somebody help with the mortgage. Also, Poway has very few 2-4 unit properties so when compared to these properties this might be a decent deal if they have similar rents but are selling for more than $525k. If you did go with a 5% conventional you could get in for relatively cheap (for the area) and still have you tenant pay for roughly have your mortgage. Either way it beats renting. The downside is that if you ever move out you will have negative cash flow every month.