[Calc Review] Help me analyze this deal

[Jonathan Hodge]

View Report

*This link comes directly from our calculators, based on information input by the member who posted.

Hi Team!

I am completely new to real estate investing. Interested in house hacking a duplex. The numbers you see are based on both sides rented out. Assuming I move out after the one year FHA requires me to stay. The first year I would not make money on this house but it would reduce my rent from what I am paying renting a 2br apartment.

The property is listed for $260K and I would like to make an offer of 180-195 depending on the condition of the property.

[Cristian Aviles-Morales]

So I was where you are a few weeks ago @Jonathan Hodge 

If it's on the MLS you won't be able to secure a property at that price PROBABLY in todays market. Not saying it can't happen.

But I ran into a quote from a user here if I remember, I think it was @Russell Brazil and it made me think differently. I'll probably butcher the quote but it went something like...

"If you try to force your numbers onto a property to make it work, you'll never move forward with owning that property. The property should fit your numbers."

And he was absolutely correct. I kept looking through the MLS for all these deals and I quickly learned that either I have to low-ball EVERYONE (Which will carry a negative reputation on me..) or I have to have 30-40% capital to put down in order for the property to cash flow. Both options are a big NO.

So I advise you to skip the MLS. Maybe have a realtor set up a FILTER for you to send you listings of properties that are UNDER a dollar amount so that you atleast get some value from it, but ultimately, you'll be hardpressed to find deals there. 

What you need to do is target "motivated" sellers. 

To do this, you can..

Drive for Dollars. Pick your farm area (target neighborhood) and drive around. Find the ugly duckling in the area. Get the address, do some research (public county records, all online) and if you think you can rent the property or up its value, send the home owners a letter to see if they'd be interested in selling their property / or knock on their door. 
The only thing about this strategy that I am still trying to figure out is financing.. but I think the best movement to be fast would be a Hard Money Lender, 80/90% of LTV financed and you bring 5-15% of the rest to finance the deal. Get the keys, go to work, refinance to pay off the HML or flip the property if that is your strategy.

Or, the Direct Mail Marketing which is the whole sending letters out to target areas and hope one bites. Etc etc. You'll need money for this too. And then financing the deals.. probably the same.. HML. Because you're looking for motivated sellers or distressed properties. I just have no experience in going through conventional means (bank/credit union) to secure a loan for these properties. Personally I just don't think they'd go for it but who knows.

Finally, there are sites/applications that you can subscribe to ($300+ / yr) that will generate reports for you based on criteria for distressed owners. Recent divorces, deaths, tax liens, etc etc. Those are the people that you try to go after. 

I hope this helps you and if you want to talk a little bit more, from a newbie to a newbie, I'm always open to discussion.