Hello investors!
I'm struggling right now to decide if I should spend more than I want on a ready-to-rent property, or risk getting screwed in the rehab process to buy a very undervalued property and try to rehab it successfully.
I've been analyzing neighborhoods and houses and have come to the following guidelines. I can put down 3.5% with an FHA loan, finance about $180k @ 5%, and be just under the 1% rule with average projected rents of $1000 per unit on a duplex. I'll be occupying one unit for 2 years, so I'll be covering part of that rent and mortgage. My expenses (property management, utilities, repairs, PMI for the loan, insurance, and property taxes) are just above $800. Securing a property for anything less than $180k, or with rents above $1000 puts me in a good position. However, finding a duplex that needs little repair for around 200k has been very difficult.
There are, however, many poorly maintained duplexes for around $80-110k which gives me about $70-80k of rehab money if I include that in the loan. In this scenario I see myself being taken advantage of and making many rookie mistakes during the rehab process.
My question, then: should I "overpay" for a turnkey so that I get landlord experience with a smaller chance of surprises, or should I buy a property in need of rehab in order to be closer to the 2% rule once I start renting, at the risk of messing up the rehab? With my inexperience I feel like I need to settle on one instead of just trying to "find the best deal."
Thank you,
Dave
