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Updated over 9 years ago on . Most recent reply

User Stats

25
Posts
5
Votes
Ernest D.
  • La Porte, TX
5
Votes |
25
Posts

First Property - Duplex in Tx Help on Numbers

Ernest D.
  • La Porte, TX
Posted

Hello BP,

This is my first property to seriously analyze since looking for a duplex in the Houston area. I cant seem to get the numbers to work for me and am asking for your help.

I am analyzing these number as if both units were rented out, but i do plan to house hack for at least the first year.

FSBO

Asking: 199k

County appraised: 145k

estimated rents in the area: 1200 per unit

estimated property tax: 300 month

estimated property insurance: 120 month (very loose estimate)

estimated vacancy: 8% ($192 a month based on 120,000 purchase price. I used 120,000 because that is 80% of appraised value. i question this.)

Loan would be FHA with 3.5% down.

Based on 120,000 purchase

loan amount: 116,400 over 30 years

down payment 4,200

4.0% interest

P&I 555.71

using the 50% rule i come up with the following expenses:

50% of income: 1200

P&I: 555.71

Vacancy: 192

Insurance: 120

Property tax: 300

Total: 2367

This equals a cash flow of 32.29

Am i over compensating for expensive by not including vacancy, insurance, ect into my 50% rule amount?

How should the county appraised amount compare to the asking price? Other duplex's in the area reflect the same appraised amount.

Most Popular Reply

User Stats

803
Posts
455
Votes
Sharon Tzib
  • Real Estate Broker
  • Cypress, TX
455
Votes |
803
Posts
Sharon Tzib
  • Real Estate Broker
  • Cypress, TX
Replied

The 50% rule covers taxes, insurance, PM, vacancy, maint and repair, etc., so you are double accounting for some of those expenses, which is hurting your numbers. Also, vacancy is calculated as a percentage of the monthly rent, not the value of the home. So in this case, 8% of $1200 rent would be $96/month vacancy factor.

The 50% rule is a just a quick way to screen a property to see if it is worth a further look. If you know more precise numbers, it is much better to use those than lump them into the 50% rule. Hope that helps you. 

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