All Forum Posts by: Eric Long

I am looking at a duplex with a 1/1 on the main floor and 3/1 on the top floor. When I was on the top floor I notice one room only had a space heater for heat, which I thought did not qualify as a heat source. 

Another question, on the main floor there is an area that could qualify as a bedroom however it has a door leading directly to the attached garage. If it was locked both ways, could it count as bedroom (everything else to satisfy a bedroom requirement should be met)?

I've hopelessly been looking on google for this answer and past BP forum posts didn't yield any results. Thanks in advance!

@Jaysen Medhurst Thanks once again! I really do appreciate you helping me out in this process.

Thanks again @Jaysen Medhurst! 

One other question: from your perspective, how valuable is IRR and CoC for yourself versus cash-flow?

@Jaysen Medhurst, thanks for the reply! To follow-up and clarify on a few things:

• To your second point, that is where I keep vacillating. I like the location and would love to live there while renting out the other unit. Upon moving out (and therefore renting the other unit out) is when the cash flow will be positive from what I could tell at this point. When you say I will have to sell it when I move out, is that because the cash-flow likely won't be worth it? Even accounting for higher maintenance and repairs, I am looking at about +$236/month, which isn't the healthiest but is positive and creates an IRR of 32% and CoC of 34% over the time frame I am wanting to hold it.
• I had $1200 for repairs and maintenance set-aside ($2400 total/year) but I should be looking at 7.5% of the rent (I'm guessing that's what GSR stands for) set aside for both per year.

I know you can't say "it's okay, go for it" because we both have different goals and expectations of properties. And if it was that easy then everyone will be in REI because it takes no personal growth. My fear is I will keep rejecting opportunities until I find the perfect one and never simply dive into REI. I'm okay with something not being an absolute home-run nor even a triple or double but something I can look back on and see it as the stepping-stone to my REI future. This is more of me spewing but at least it gives you my mindset on this first deal.

I really do appreciate the clarity you provided; I will have to think long and hard about it. I am seeing the property again tomorrow with a more investor-friendly realtor, so perhaps I can get more concrete numbers that might make this decision easier.

Hi Everyone,

This will be my first real estate purchase of any kind. I will admit, I am smitten by the location so I am having trouble separating emotion from numbers and need some experienced advice. As the title says, I am looking to house-hack a duplex. Ideally, I would find a deal that pays my mortgage and expenses but I am also okay paying $400 to about $1000 to live in a duplex as it will be my primary residence too (I budget roughly about $800 in rent). 

With that said, here is rental property calculator showing my investment, assuming I will likely be moving out in a couple years. It is listed for 180,000 and appears to be roughly $30K undervalued. I estimate about $5K in repairs at the moment but am not too sure how much that will affect the value of the property given that it is undervalued at baseline. Therefore I'm just going with the market value of the home.

A few quick points about the property that may affect the rental property calculation:

• It is located in the historic district of my city.
• It is about a block away from a major hospital in the region and less than 2 miles away from a major university. I work at that hospital, so it will save a total of 40 minutes commute and 23 miles everyday
• It is in a floodzone AE, hence the high insurance cost. However, it has gorgeous views over the river.
• It has a large, mostly unfinished basement, and an attached garage. I'm not sure how to use both spaces, but I'm sure I can charge for storage and garage at some point. I'm just assuming $100/month for both at the moment.
• I am assuming $100/month for both repairs and CapEx.
• $2000 is the lower end of rent capable for the property, fully rented out. 
• I'm assuming a 3% appreciation/year but have no idea if this is reasonable
• I'm assuming I can get the property for $170,000 due to the flood zone problem and general negotiations but I have no way of knowing if it will work this way.

When I rent out the top unit, I can get, at minimum around $1000. This will put my monthly loss at $769, but that is still within my budget of paying for a place to live, so I am okay with that loss. When I rent out both units for, at minimum, $2000/month, I will have a positive (but very small) cash flow per month. At this point I am getting somewhat hesitant. I am using as conservative numbers as reasonable, so I know that it (hopefully) won't get any worse than that and the upside is the location has incredible opportunity from the hospital and the university. At $2500 rent/month, which is the more realistic, I am looking at about $400/month of positive cash flow which I am quite happy with. I believe my best tenant population will be with students but it is hard to tell at this point. 

My biggest worry is that I am banking too much on equity appreciation and the projections of what the property could be. While that definitely should be considered, I may be assuming too much in that area. I know I am biasing myself to make this work so I need objective eyes not as invested. What am I missing in this analysis? Keep in mind that I plan on holding long-term

Thanks for any help!

Thanks for the response, John.

I'm not entirely sure what waterproofing means in light of flooding, but I think it is flood proofing, like you were saying. Here is the link to the specific company's overview of waterproofing. 

What is the catch in getting non-NFIP flood policies? 

Thanks for the thorough response and advice @Michael Norris!

A few follow-up questions/comments:

1. In regards to purchasing the flood zone insurance, would a year's worth need to be purchased up-front and then put into escrow? Or just having a policy signed and agreed upon? 
2. In regards to rezoning, I was told by the realtor that the seller is paying for the rezoning already and the initial survey "looked good". I'm not holding my breath and will just look at the property as if it won't be re-zoned. According to the FEMA map, it appears that a small part of the property may be in the Floodway Zone AE versus the standard Zone AE (see image below) and perhaps that's the "looks good" part of the new survey?

Hi Everyone,

I am slightly confused by flood insurance, the different tiers, and how that ties into home insurance as a whole.

For context: I am looking at a duplex that is currently in the 'highest tier' for a flood zone and will, therefore, require a flood insurance policy. The house was for sale as 'cash only' but the realtor found out the owner will accept loans. I was told the 'cash only' was likely out there so that a buyer would not need to purchase a year's worth of flood insurance up front to get financing. I was also told that the property is being re-surveyed to try and drop it to a lower tier of flood zone, which should decrease flood zone insurance costs. Further, the house recently was 'waterproofed'. Finally, according to FEMA Flood Map, it is a floodway Zone AE.

My questions are:

1. When using bank financing for a house in a flood zone, are you required to purchase a year's worth upfront and then make monthly payments?
2. How easily can individual properties be rezoned to a different flood zone? 
3. Does waterproofing a house help change a property's flood zone?
4. Is flood insurance added on top of home insurance?
5. What are the different levels of flood zones and about how much of percentage drop/increase in price is attributed with each successive flood zone?

This will be my first real estate deal too. I plan on living in the lower unit and holding the property long-term. The location is fantastic (block away from a major hospital and a mile from a major university) so property value should increase over the life I will hold it. I am not too caught up on making sure it positively cash flows while I'm living in it either.

I know a few of these questions will be better answered by an insurance agent but I'm curious about general sentiment from investors who have spent time dealing with homes in a flood zone and get a feel for the thought process I should be adopting when it comes to looking at this issue.

Thanks in advance!