Deal Analysis: Duplex for house hacking

[Ken Swearengen]

We looked at a house a while ago, but due to a death in the family we ended up suspending our house hunt and didn't end up making an offer on it. It was originally listed at $250,000, and on the market for about 3 or 4 months before it was delisted.

We ended up getting a hold of the seller and he said we can make him an offer. The seller wants to sell as-is because he's getting old and doesn't have the energy or motivation to fix things up -- but fortunately it's been well-maintained. One unit is empty and the other is occupied by his son who would leave if we bought it. Each unit is 2 stories, 3 bedrooms 1 bath at about 1200 sqft. It's in a semi-rural area with low vacancy rates; based on rentometer I think I could get at least (lower 25th percentile) $1450 per month for each. More likely could get $1600 for each. 

Key attributes: Well & septic, baseboard heat, seperatley metered electric.

Pros: Large yard with a deck, quiet setting, close to major highways and the city. Brick exterior. Good schools. House in good condition for its age (at least as far as I can see). 

Cons: CSX train tracks about an eight of a mile from the house (hidden by some woods). House built in 1890's. Basement was wet when we first looked at it, but no mold and our agent wasn't worried about it. Ceilings are a bit low (around 7 feet I think?). Brick exterior was remodeled so the colors don't match around windows and some doors.

I guess my question is: What should I look out for or be aware of when putting in an offer and doing my due diligence? I haven't looked too much into as-is properties before (the this one seems to be different given its condition) so just want to make sure I'm not getting myself into something I can't handle.

[Daniel Haberkost]

@Ken Swearengen 

So if you purchased at $250,000 what would the mortgage come out to? I have no knowledge on what property taxes & insurance are like in your market which can vary quite a bit. 

In my opinion, a successful house-hack should at least completely eliminate the mortgage/utilities which leaves you with repairs & maintenance/vacancy/cap ex/etc. (Unless you're in an extremely expensive market)

Your description of the seller makes me think there is likely a large amount of deferred maintenance. In general, you should budget for significantly more capital expenditures with a house that age. 

Also, what jumped out at me is that you said it was wet in the basement and your agent "wasn't that worried about it". Unless your realtor is a trusted family member or someone you've known personally for a long time I'd be wary on taking their advice on that. Again, maybe I'm wrong and this is someone you know you can trust but be careful as their interests are in making a commission which rarely matches up with what you want long-term. 

Ultimately, you need to run the numbers and figure out what purchase price creates a monthly payment that makes sense based on the rents. Then make an offer with the proper contingencies so you can back out/renegotiate if the inspection finds serious issues. 

-Dan