Would you buy a half duplex?

[rcardin]

It seems that there are alot of half duplexes for sale close to the school I teach at. Makes it real easy to drive by the property after work almost daily. Most are between 39k and 50k.

this one is:
built in 1973
1562 sq ft
4br 2 ba
Taxable value 72,650
6-8 blocks from the high school
It is a repo
asking price 41,900
52 days on market and already dropped 7k in the listing.
Rentable for anywhere between 800-950 because of the 4 bedrooms. Section 8 rental value is closer to 1100 a month.

Looks like cash flow would be minimum 300 a month. i have not looked at the property yet. We are narrowing down to 6-8 properties to look at this weekend but this one caught our eye.

Would you buy half of a duplex if it would cash flow? Looking for any negatives that we might not have thought of.

 

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[CarrieW]

personally I would buy one to rent out or resell someway but I wouldnt buy it for my own personal residence.

we are renting one side of a duplex now and have lived in a private apt and in our own sfh in a development. we like the idea of having more room between us and the neighbors.

when we buy next for ourselves personally it will be at least 2 acres preferrably 5 or more. the size of the house doesnt matter to us as much as the land.

Id buy anything for an investment if the numbers made sense.

negatives I can think of would be any code issues, pest problems or trashy neighbors who dont keep up their side.

code issues would concern me if the half attached to you is sold or is in need of a repair the things that need to be done may affect your side of the house and your wallet.

 

[hakrjak]

At one time I owned as many as 4 half duplexes. They are a great entry point into some markets, and you can get square footage cheaper than just about any other way by purchasing a half duplex.

Think of it as buying a patio home or townhome but with ZERO HOA dues, and no annoying association to have to deal with.

Cheers,
- Hakrjak

 

[andviv]

half-a-duplex, if titled individually, is like any other SFH.
If it cashflows, and that is your strategy, then analyze it as any other property.
There was another post about duplexes here http://www.thefastlanetomillions.com/showthread.php?t=8837

 

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[rcardin]

at 26.82/ sq ft it is among the cheapest we have found. i am calling the local housing authority to find out what fair market is for sec 8 rental and making an appointment to go see it after school today.

 

[Runum]

How do you splve problems like rooffing and exterior painting?

 

[lightning]

At one time I owned as many as 4 half duplexes. They are a great entry point into some markets, and you can get square footage cheaper than just about any other way by purchasing a half duplex.

Think of it as buying a patio home or townhome but with ZERO HOA dues, and no annoying association to have to deal with.

Cheers,
- Hakrjak

Agreed! If the property can be bought under-market and will cash-flow, without a doubt!!!! A friend of mine owns a few of them, and will routinely try and buy both sides of them as they become available. Great entry point indeed.

 

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[rcardin]

Looked at the one and it needed foundation work. these are actually 4 plexes titled individually. If I can find one that doesn't need foundation I would be interested. There are about 300 of these units in a small subdivision. Probably 30 for sale in the area but only 2 or 3 for rent. Alot of banked owned units.

All of the spreadsheets I have collected show it cash flowing at least $100 a month on a 30 year note. about $15 a month on a 15 year note. So do you go for cash flow now or cash flow later?

 

[lightning]

All of the spreadsheets I have collected show it cash flowing at least $100 a month on a 30 year note. about $15 a month on a 15 year note. So do you go for cash flow now or cash flow later?

I personally LOVE the idea of an investment property being completely paid off in 15 years. (the fact that even while on a 15-year mortgage it will STILL cash-flow is a no-brainer to me!!). Im an amatuer however, so Im curious to see what the "Pros" would do in this situation.

I priced a 15-year mortgage on the property I just bought, but opted for the 30 year instead. The 15-year mortgage (although obviously attractive due to how fast I would own the place!) would have put me in the red by about $350-400 a month. I would never want to strap myself that badly merely to hold onto an investment.

 

[hakrjak]

How do you splve problems like rooffing and exterior painting?

It's easy, you just worry about your side. I just reroofed and re painted all of mine, it wasn't that big of a deal at all. Everything is 1/2 as expensive

- Hakrjak

 

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[MrPink]

Hey lightning,

I have the same feeling about paying off the house in 15 years although have a voice in the back of my head that say don't get all your money locked into house and miss other opportunities. I think that if the other opportunity comes, I will be able and motivated to get the cash.

Mr. Pink

 

[I85]

All of the spreadsheets I have collected show it cash flowing at least $100 a month on a 30 year note. about $15 a month on a 15 year note. So do you go for cash flow now or cash flow later?

I would think that would be a personal choice and mainly dependent on you and your goals.

I assume you made these spreadsheets and are not taking the word of the seller or some other person. If so, which rent amount was used to come up with the 100/month cash flow. I also assume you have quotes on all repairs needed. How much are they?

 

[Adam K]

This is a great topic. However I have a general question, Lets say I have a house I purchased for 149k took out a second for 80k thats 230k. I had an appraisal come back at 420k thats 190k in equity. Now here comes the question If I found a property for 50k would you use a 50k equity loan on the first home to pay off the second to make it 100% cashflow from that second property?

I know this questions seems general to an extreme I just want to see if my mind set is in the right place.
Thanks
Adam

 

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[rcardin]

http://ntreislistings.marketlinx.co...1-bd68-4c47-8c44-401a8cb8d39f&AgentId=D959531

Here are 4 of the listings I am looking at. There are currently 10 available form 38,900 to 69,900.

Average rentals:
650 2br (Low end)
799 3br ( we stopped and looked at one of these and got the info from the property manager.
850-900 4br (Just guessing based on low end apartments)

Anything other than foundation I can do myself for the cost of materials. I have done complete rehabs (new texture, paint, tile, refinish bath tubs, carpet, light fixtures, plugs, switches and plates, etc.) for around 5k in materials. It's all about having the right tools for the job.

 

[phlgirl]

This is a great topic. However I have a general question, Lets say I have a house I purchased for 149k took out a second for 80k thats 230k. I had an appraisal come back at 420k thats 190k in equity. Now here comes the question If I found a property for 50k would you use a 50k equity loan on the first home to pay off the second to make it 100% cashflow from that second property?

I know this questions seems general to an extreme I just want to see if my mind set is in the right place.
Thanks
Adam

Are you able to fix the rate on the HELOC for a given period of time?

The math should be exactly the same. Figure out what the additional payment will be on the first property and allocate it to the second property. Add taxes, insurance, vacancy, repairs, etc. and see what type of cash flow it produces. It is not 100% cash flow unless the rents from the first property cover this additional HELOC amount, in addition to all other expenses for both properties.

To answer your question, I would certainly consider it, if I were able to fix the rate. Reduces your closing costs and only shows as one mortgage on your credit report.

 

[Adam K]

I was going to refi the first property again after I did the purchase on the second property. Right now I am pocketing 650 from the first property from the rent of the house's first floor and im also renting a spot in my garage to a friend for storage. I went and did my calculations with a mortgage at 5.75% interest for 30 years. That would give me a payment of 291.79. I went and checked what kind of interest rate I could get with a equity loan on my first house it would be 6%. Now if I bought that house with the equity in my first im still looking to pocket something at then end of the month on my first house. And ill be making free and clear rent from the second property. Am I looking at the right?

 

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[phlgirl]

http://ntreislistings.marketlinx.co...1-bd68-4c47-8c44-401a8cb8d39f&AgentId=D959531

Here are 4 of the listings I am looking at. There are currently 10 available form 38,900 to 69,900.

Average rentals:
650 2br (Low end)
799 3br ( we stopped and looked at one of these and got the info from the property manager.
850-900 4br (Just guessing based on low end apartments)

Anything other than foundation I can do myself for the cost of materials. I have done complete rehabs (new texture, paint, tile, refinish bath tubs, carpet, light fixtures, plugs, switches and plates, etc.) for around 5k in materials. It's all about having the right tools for the job.

Sounds like a good opportunity to me. The only thing I would suggest is that you factor in all the carrying costs, for the period of time that construction will be under way (including time to rent). 5k sounds low to me but it really depends on the condition of the house so you would know best. Do you need to re-wire, re-pipe? Any roof, HVAC or septic issues?

My husband is a contractor. Just remember to add that extra 20% buffer - in both $$ and time - something always goes wrong.

Best of luck!

 

[rcardin]

I have alot of things in my favor coming up in the next 6 weeks. We signed the gas lease on our other rental for 5400.00. That and our savings will cover the down payment and closing on the next investment property. Income tax return should cover carpet and repairs.
We are both teachers so we are coming up on summer vacation for us. Prime time for rehabbing. No payment for the first 45 days gives us time to rehab and make ready for move in July 1st. We also have a high number of migrant families around here. When school is out they move. Should put us in perfect rental season.

Still debating on whether to go for cash flow with a 30 year note or build up equity faster with a 15.

 

[phlgirl]

I was going to refi the first property again after I did the purchase on the second property. Right now I am pocketing 650 from the first property from the rent of the house's first floor and im also renting a spot in my garage to a friend for storage. I went and did my calculations with a mortgage at 5.75% interest for 30 years. That would give me a payment of 291.79. I went and checked what kind of interest rate I could get with a equity loan on my first house it would be 6%. Now if I bought that house with the equity in my first im still looking to pocket something at then end of the month on my first house. And ill be making free and clear rent from the second property. Am I looking at the right?

Let me see if I have this right. You are thinking take a HELOC on your primary to purchase the 2nd investment property. Then, once closed, refi your first investment property at 5.75% over 30 years and pay off the HELOC on your primary?

Just make sure you are able to secure both loans. I know a lot of people are having a really hard time getting HELOCs on their primary residences and 5.75% sounds low for an investment property rate. We have a pretty good deal here and are at 6.75% on investment properties (although we are stated income and perhaps you are not). Also, how old is that appraisal? Things are changing by the day and you want to make sure that you will be under 75% LTV on the investment property - it is likely that is all they will be willing to give you. Also factor in that the bank will want to do their own appraisal and many of them are asking their appraisers to err on the side of caution these days.

I'm not saying you can't get this done..... just make sure you have confirmed each of the necessary parts beforehand. I would probably want to line up a few different banks as options. And, of course, factor in repairs, etc.

 

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[phlgirl]

I have alot of things in my favor coming up in the next 6 weeks. We signed the gas lease on our other rental for 5400.00. That and our savings will cover the down payment and closing on the next investment property. Income tax return should cover carpet and repairs.
We are both teachers so we are coming up on summer vacation for us. Prime time for rehabbing. No payment for the first 45 days gives us time to rehab and make ready for move in July 1st. We also have a high number of migrant families around here. When school is out they move. Should put us in perfect rental season.

Still debating on whether to go for cash flow with a 30 year note or build up equity faster with a 15.

Timing sounds great!

If you are on the fence about the 30 vs 15, I would say go with the 30.... at least then you have the option, should you need the extra cash for something else later. You can always increase your payments on a 30 and pay it off much faster. Just set up your automatic payments to pull additional principal each month. If you ever find yourself in a squeeze, you can drop the extra payment.

Good luck.

 

[skeebadeek]

I prefer the 30 year note myself. If you are using bank loans and mortagages to buy your properties, the lower payment will work in your favor. Also as you begin to own more property you will find that you will not hold them for the full 30 years because you may be exchanging them for larger properties. The only advantage in that case is mortgage reduction, which is not all that much of an advantage until you get into the major principal reduction phases. Your main concern should be creating equity when you buy.