Virginia Beach, VA · Member since 2015 · 54 posts · 14 votes
I am looking to purchase my first owner occupant duplex in Hampton Roads area. When I run the numbers it feels like I'm missing something. Could use some advice.
List price:180k
2b/1b in unit A and unit B. Listed as renting for 950 each. I would like to offer at least 20% off list but it is a new rehab so re agent says stay at list price (of course). it is in a good location and I would use fha financing putting payments at 1170 or so. This would only be for a year and then rent out both units.
Any thoughts as to whether offer list and if not what would you suggest? Is this a deal or move on?
I would live in one unit for a year then rent it out for another 950 when I move. So total rental income would be 1900. I didnt think about trying to refi after a year though. Im also working on an inherited vacant property as my next investment.
But, you'll still have to live somewhere when you move, right (for how much per month)? If your current (and future?) living arrangement is cheaper, is the ONLY reason you're looking for an FHA loan because you're really trying to INVEST, but, you have less than 5% deposit?
If so, you'll only get ONE shot at it, unless you get a super bargain that'll gain you significant extra equity from day one (ie. NOT from a Turnkey Company or other market-price Sellers). And as has already been mentioned, getting (only) 1%/m gross rent return, when you're relying on close to 100% borrowed money at the same time - will mostly land you in NEGATIVE cash flow territory. [There's TWO Rules of thumb for you]. Good luck...
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
9y
@Noelle Yarn, why do you think you're missing something? Do the numbers look too good, or too bad? Looks fairly standard to me. [But that's not to say it's worth it as a pure INVESTMENT]. Am I missing something?
Next question: Where will you live (and how much will it cost) after a year? [If you're just thinking of rinsing and repeating, my guess is you WON'T be able to refi out of your FHA loan into a conventional INVESTMENT loan by then, simply because, you won't have enough equity]. All the best...
Virginia Beach, VA · Member since 2015 · 54 posts · 14 votes
9y
I would live in one unit for a year then rent it out for another 950 when I move. So total rental income would be 1900. I didnt think about trying to refi after a year though. Im also working on an inherited vacant property as my next investment.
It's a 1% deal and calculating VIMTM to be 50% (Vacancy, Insurance, Maintenance, Taxes & management), it looks like a negative cash flowing deal for the long term.
What are you looking for out of the deal. Cash flow? Appreciation? There may be details you have that make this a good deal, but from a cash flow perspective... it doesn't look like one at first glance.
Virginia Beach, VA · Member since 2015 · 54 posts · 14 votes
9y
Brandon Johnson i am looking for cashflow and while using fha to purchase first property. I dont believe there is much more that I can do to add value and force appreciation since it will be turnkey. What would you possibly offer to make this a deal??
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
9y
I don't think this is a bad deal, but there are a couple things to consider. I'd never buy a property with the intention to make the deal work through a future refi- you don't have any idea where rates will be in a year or five, a plan like that could sink you. Buy based on the numbers today, and if you can improve that in the future, that's the gravy. Second, is this an MLS deal? Has it been on the market for long? Whenever I see a "good" MLS deal that has been on the market for more than a few days and another investor hasn't picked it up, it's very likely there is a problem there, either a major issue with the property or the market is softer than you think it is in that area.
I would live in one unit for a year then rent it out for another 950 when I move. So total rental income would be 1900. I didnt think about trying to refi after a year though. Im also working on an inherited vacant property as my next investment.
But, you'll still have to live somewhere when you move, right (for how much per month)? If your current (and future?) living arrangement is cheaper, is the ONLY reason you're looking for an FHA loan because you're really trying to INVEST, but, you have less than 5% deposit?
If so, you'll only get ONE shot at it, unless you get a super bargain that'll gain you significant extra equity from day one (ie. NOT from a Turnkey Company or other market-price Sellers). And as has already been mentioned, getting (only) 1%/m gross rent return, when you're relying on close to 100% borrowed money at the same time - will mostly land you in NEGATIVE cash flow territory. [There's TWO Rules of thumb for you]. Good luck...
Virginia Beach, VA · Member since 2015 · 54 posts · 14 votes
9y
Ok thank you! That definitely helps. The property has been completely gutted and in the middle of a rehab. It has only been on the market for 3 days. One unit is smaller than I realized and realtor says I could probably only get $800 for the smaller one. So unless They accept a much lower offer doesnt sound like its the best investment right now.
Fernandina Beach, FL · Member since 2017 · 18 posts · 7 votes
9y
Noelle - I think I know what property your talking about if it's in Norfolk. Completely remodeled, new roof, appliances, windows and HVAC. If someone already flipped it, chances are they want there money for it. It's a good property if you're looking to live rent free (or almost) and have someone pay your mortgage. If your looking for a deal though, I don't think you'll get it with that property. Look for something you can flip and rent or sell.