All Forum Posts by: Michael B.

@Patti Robertson Thank you for the heads up and taking a look at this! My wife and I have ultimately decided to pass on this for a number of reasons, but here are the top few:

1. The current market situation, particularly how it pertains to this property. All things considered, we found the price to be too risky in our opinion and much higher than other neighborhoods that we would be perfectly fine with living in. Low interest rates create leverage to chase these price points, but we learned the hard way in 2006 and its hard to forget.

2. Age of the property and it's in a flood zone.

3. It did not meet our cash flow objectives if we converted it to a rental in the future.

I'll add as well that we are beach people, so we found the opportunity cost too high in potentially missing a better location in that regard.

Thanks again for taking a look! And I appreciate all of your advice through your many platforms, here on BP and especially TRIG!

@Sean Rooks yes please! I'll PM you with my contact info. Thank you!

Thanks for taking a look @Aaron Zimmerman! Yes, you are correct, I did not include the Capex number. This is a historic house, so that number may be too substantial for this scenario making this a bad deal. It seems that I would need to factor in doing most of the maintenance and improvements myself in order for the numbers to work.

I estimated vacancy this low because the area has strong rental demand. This property has a recent rental listing that was listed for only 4 days before a tenant was obtained.

The gross rent was provided by the current owner for the 3 units that are 1Br/1Ba. I have a family of 4 and would have to occupy the 2Br/2Ba unit. It's difficult to estimate how much room there is to raise rents, but there is a 1Br/1Ba in the same general neighborhood that listed today for $1,095/mo.

Numbers if it was fully rented (not owner-occupied):

CF & ROI (Outsourced Propert Manag.)
Annual Cash Flow $1,501
Cash ROI 10.67%
Total ROI 87.99%

CF & ROI (Doing My Own PM)
Annual Cash Flow $5,895
Cash ROI 41.90%
Total ROI 119.22%

1900s Quadplex (fourplex, 4-unit), (1)2BR/2BA owner-occupied, (3)1BR/1BA, Gross Rent 2640/mo, (2)1yr/(1)Mon2Mon, Electric Separate, Owner pays other utilities, Offer $469k, VA Fund Fee 2.3%, 2.5% rate, 0 down

*Currently renting a 2BR/2BA appartment for $1444/mo

Cost Assumptions
Purchase Price $469,000
Land Value (25%) $117,250
Building Value (75%) $351,750
Improvements $0
Closing Costs $14,070
Total Cost $483,070

Financing Assumptions
Downpayment 0.00%
Finance Amt $479,787
Downpayment Amt $0
Interest Rate 2.500%
Mortgage (Years) 30
Mortgage Payment $1,896
Cash Outlay $14,070

Revenue Assumptions
Monthly Rent $2,640
Vacancy Rate 3.00%

Revenues
Rental Income 2,640
Vacancy/Loss Rate 3.0%
Vacancy/Loss Value (79)
Gross Income 2,561

Expenses
Property Taxes Annual 5,398
Insurance Annual 1,956
Maintenance & Repairs Annual 3,500
Utilities  Annual 3,150
Variable Cost PM (% Income) 10%
Flood Insurance Annual 1,293

Total Expenses 18,370
Net Operating Income (NOI) 12,360

Cash Flow
NOI (Cash Available) 1,030
Mortgage 1,896
Total Cash Flow (866)

CF & ROI (Outsourced Propert Manag.)
Annual Cash Flow ($10,389)
Cash ROI -73.84%
Total ROI 3.48%

CF & ROI (Doing My Own PM)
Annual Cash Flow ($7,316)
Cash ROI -52.00%
Total ROI 25.32%

cap rate 2.64%

Option to pay $1200(qtr point) to get 2.325 rate

In a desirable Norfolk neighborhood.

Thank you @Erick Pinzon for the feedback! Yes, I would be mowing the lawn, and likely self-managing the other unit. I tend to agree with you that I can do better for the money. I've been focusing on quads in Norfolk as well, and you're right, they go super quick! Did you bid over or under asking on the properties that you mentioned?

Help me with my first house hack, please!

1988 Duplex, 3BR/1.5BA Aprox 1050 sqft /unit, Both Rented $1050 (1)1yr/(1)Mon2Mon, Utilities Separate, Offer $350k, VA Fund Fee 1.4% financed, 2.65% rate, 10% down

Cost Assumptions
Purchase Price $350,000
Land Value (25%) $87,500
Building Value (75%) $262,500
Improvements $0
Closing Costs $10,500 / Funding Fee $4,900 (8,050 @0% down)
Total Cost $365,400

Financing Assumptions
Downpayment 10.00% (0% possible with 2.3% funding fee)
Finance Amt $354,900
Downpayment Amt $35,000
Interest Rate 2.65%
Mortgage (Years) 30
Mortgage Payment $1,430
Cash Outlay $45,500

Revenue Assumptions
Monthly Rent $2,475 ($1050 for the unit with 1yr lease/$1325 est. for owner occ unit, based on lowest est. of Zillow/Rentometer)
Vacancy Rate 8.00%

Expenses
Property Taxes Annual 1,997
Insurance Annual 1,200
Maintenance & Repairs Annual 1,616
Variable Cost PM (% Income) 10% 2,732
Capex Annual 1,616
Lawn Care Monthly 20
Total Expenses Annual 9,401

Net Operating Income (NOI) 17,923

CF & ROI (Outsourced Propert Manag.)
Annual Cash Flow $1,001
Cash ROI 2.20%
Total ROI 19.46%

CF & ROI (Doing My Own PM)
Annual Cash Flow $3,494
Cash ROI 7.68%
Total ROI 24.93%

*Based on both units being rented, understanding that owner-occupancy will affect these numbers.

Description
Built in 1988, duplex, each apt at 1050 sq. ft. 3 bed, 1 bath up - L/R, EIK, rear room with W/D hookup and half-bath down. Both units renovated, ceramic tile, carpet. Water, elect separately metered and paid by tenant. Heat pumps. Parking space 1 per unit.
Plenty of in front of off-street parking. 100% leased. Current long term tenants. Owner-managed. Located in the Lake Smith area of Virginia Beach, 1 block to the lake for boating/fishing, 2 miles JEB Little Creek, Chick’s Beach, and Haygood Shopping centers.

Concern is the opportunity cost of being tied up in this property for 1 year before I am able to purchase another house hack and potentially missing a tri or quadplex (fourplex) deal. Also, both units are currently rented to low-income housing program tenants.

@Eric Teran Great suggestions on where to look. I'm building my contractor list as well. I mostly have contractors that I dislike so far. My projects are SFHs and multifamily up to 4 units in Montgomery, Frederick, Howard, Carroll, and Washington counties in MD. My budgets are ~$150k for a gut, down to ~$10k for cosmetic. Do you recommend any contractors that fit this criteria?

I tend to agree with you, @Stephen Kehoe. Thank you for the advice! I'm not at all sure of what the magic number is in this case, but I'm aware of what you're referencing with "magic" numbers. The seller was asking $360k and I offered $370k. Comps, though few and far between, are $360.5k, $394k, and $330k (duplex). As for the personal benefits, it offers no real advantage other than financial.