Background:
I live in Richmond Virginia, and looking to purchase my first property, a duplex in an up and coming neighborhood. The plan is to do a classic live in flip, BRRR, and then move on to the next property. The numbers looked good, I put an offer down (before COVID-19), and in the final stages of escrow. Now the main question is, do I continue through? Or wait until the market bottoms to get a better deal?
Details:
- Current purchase price: 255k
- Duplex is in fair/decent shape. Houses fully rehabbed on that street were selling for roughly 370k
- 3.5% FHA loan
- Seller credits: 15k (5k will be to cancel out closing credits, 10 to rehab)
- Expected rent per unit: 1200 (pre COVID-19)
- Expected cash flow: $450/month (pre COVID-19)
- Expecting putting in another 10k into the property
- I'm in a financially good position at a decent job
Pros of buying:
- Duplex is on a great street mostly turned over surrounded by a neighborhood that's growing.
- Its a duplex which is hard to find in Richmond. Especially where I'm looking
- even if the rent goes down 20%, I'll still cash flow.
- got a great FHA rate. Bought the bottom. More important than the rate, this is allowing me to cancel out more closing costs
- Start gaining experience in rehabbing and real estate
- its a long term investment, even if the market dips, it'll still be profitable.
- if the market dips, I could buy again in 6-12 months. This is probably when you'd see the bottom for real estate anyways.
Cons
- could get a better entry by waiting
- probably will get a worse renter, and not as much rent as expected
- The effects of COVID-19 are uncertain. No one knows how bad this will get.
- Probably can't BRRR for a while
