All Forum Posts by: Kal A.

Hi all, 

This is my second duplex I'm trying to close on in just over a year since the first purchase. I'm planning on living in this next property. First, the lender is telling me that to get traditional financing I would need 25% down, but I thought if I'm living in it, it would only be 20%. She also told me that I can't do FHA because I already own another property as an investment. She's offered me a 7 year ARM at ~4%, 10% down, no PMI. With a >825 credit score I thought this interest rate was high.

Should I be looking for a new lender?

@Scott Smith Thanks for the thorough reply! 

@David Wright Absolutely. 

Basically, you're saying if you can't use it for asset protection just forget about using an LLC?

I'm purchasing a duplex on a 30 year traditional mortgage. I'm planning to transfer to a LLC after the purchase, understanding the "due on sale" clause is unlikely to be enforced. Got me thinking, even if I had to maintain personal ownership of the property... are there other reasons I should conduct the property transactions through an LLC entity without the property being owned by the LLC?

Business checking accounts? More professional business? Others?

Interested to hear your thoughts.

Thanks for the thoughts, @Wesley W.! Yeah, my reservations were in regard to wasting the interested party's time, so I think your comments are spot on. Just wasn't sure how common something like this would be. I heard it on a podcast or read it (can't remember). Rental comps are probably the way to go (with dignity).

What are your thoughts on placing an add on craigslist (for rent) to understand the interest in a potential set of units you are looking to purchase? The property has been vacant for a year and wasn't rented before that (owner lived in one and used the other 3 as storage, so I don't have any leases to reference). Looking to understand the interest beyond just using rentometer.

Frowned upon?

@Margie Fuller Thanks for the input! That sounds like quite a surprise, but you seem to have handled it well. That's honestly a big portion of what keeps me on the sidelines up to this point. Purchasing something that seems like a good deal only to find out there is 20k of unexpected capital expense, up front. I know you can mitigate the risk with a good inspection, but it just seems too real of a possibility. Something i'm working through with mindset.

@Mike McCarthy Do you suggest a pest inspection even if there isn't anything in the disclosure? (for the next deal evaluation)

@Ricardo R. I don't know how this comment slipped through my notifications! Thanks for the well thought out advice, I decided to pass on this opportunity. The margins were just too tight. One miss and it was a sinking ship. 

Thanks, again!

@Ricardo R.

All very good points. I haven't added in any lawn or snow removal. That would certainly bring the return down.

The tenants would be responsible for electricity (two meters on the property) but water and gas are not. The current owner somehow had them splitting it 60/40 (the 2bed unit paying 60%) for water and gas. I guess i haven't quite figured out how that works yet. 

For laundry, the 2bed unit has a washer and dryer in the basement. This is only accessible through the 2 bed unit. The 1 bed unit doesn't have any laundry provisions. The only unused space that i could charge for would be the garage. 

Great points! These inputs will only bring my analysis down further. Thanks for the response!

Hi BP community,

If you could take some time, I'd appreciate your feedback on an analysis of my first deal. I'm investing in Iowa and i'm targeting a 10% CoC return with at least $100/unit cashflow.

The property: It's a small duplex. 2b/1ba ground floor unit (currently renting for $600/mth) and a 1b/1ba upstairs (currently renting for ($375/mth). 2 car detached garage. The disclosure indicates that there were termites mitigated in 2013 and that the damage was minimal. I'm not sure what to think about the termite damage, without getting an inspection (which i would do). Within the last 5 years, the water heater has been replaced, a new roof has been installed, radon mitigation system installed, central air AC system installed

My analysis: 

• Assume purchase price of 100K, 3K closing costs, 25% down @ 5.25% interest (quote from local bank), $600/yr insurance, 1600/year property taxes, 5% of monthly gross income for vacancy, 7% for repairs, 10% for CapEx
• Below, I've shared my analysis document. Using the current rents, i get a CoC return of 6.99% (booooo) and cashflow of $163.
• But i think the rents may be under market, I also think i can raise the rents if I charge for use of the garage (right now the garage stores the owners stuff). If i can increase rents by $50 each, I'm up to 10.34% CoC return and ~$260 cash flow.

Link to Google Sheet Analysis

I'm concerned about my analysis being so sensitive to $100/month. Thoughts??? Am i trying too hard to make the numbers work?! Thanks for your time/thoughts!