The plan was always to purchase a Duplex and live in one side and rent out the other. After looking at properties for 8+ months and seeing 1 duplex every 2-3 months and watching single family home prices rise rise rise, we ended up getting a single family home in a great neighborhood for a really good deal. I've been keeping my eye out for duplexes ever since. They are few and far between in the area I'm looking in. I've seen 3b/2ba and 2b/1ba duplexes but NEVER two 3b/2ba units
Current House - 3b 2ba 1800sq ft with small yard and pool. Near a large park and school, great neighborhood. no HOA. Current mortgage & insurance $1250 (I put an additional $200 as overpayment bringing monthly to $1450)
Purchased in 2015 for 215K @3.75%, immediately appraised for 233K. Houses in area were going for 250K. This house had a HIDEOUS kitchen which is why it was listed lower. I remodel kitchen with new floors, cabinets, appliances, counters and it looks GREAT. Recently put in a $10K roof too ( at no cost to me. thanks insurance!)
Current Zillow and Trulia value ~$280K which seems to be accurate. Absolute WORST case my house sells for 260K. I owe just under 200K on mortgage. 6% realtor fees means I can pocket $45K - 63K. New job means my commute is now 30mins to 1 hr one way in traffic.
New Duplex
Two 3b/2ba units. 1100 sqft and 1050 sqft. Each with a private yard and seperate car ports. Listed for 320K max offer would be 310K. Mortgage & insurance would be ~$1600/mo no hoa
I would like to fully remodel both sides. After my experience remodeling my kitchen and doing the math, I believe I can do both sides for under 40K (floor, kitchen, bathrooms). Both sides would look clean, new and beautiful. The area is near a university so more college kids than my current family neighborhood. There are new town home builds in the area going for 250K - 450K. Single family homes are going for ~250K. Some houses are a little more run down while others have been completely flipped and look really nice. Basically trying to say it's an up and coming area. DH and my commute would each also be <10 minutes!!!
Rents are going for $1,000 - $1,700 depending on the property. After the remodel I'm confident I could get the higher end of that. Minimum would be $1400. We also have a current roommate who is extremely trustworthy, that we would have rent out the other side. We would possibly give him a break on rent because he would be extremely lenient with repairs and could even do his own maintenance
Mortgage for the property with insurance is expected to be $1600. This means my housing costs could be under $300.
I understand this "rental" is no where near the 1% rule (310K purchase + 40K = 350K
1% =3,500) but I'm not so much concerned with making a profit right now, as I am with living in a place with all the upgrades and design I want while simultaneously lowering my housing costs.
I see rents continuing to rise in this area and after 5 years would move to a single family home and keep the property as a rental.
My question: IS THIS A HORRIBLE DECISION??
Moving Pros
-housing costs goes from $1400/mo to ~$300 (I know, plus maintenance. But I am really handy and make most repairs myself. Only big ticket items scare me like A.C., water heater etc. Duplex has new AC installed while current house AC may bust in under 5yrs)
-Pretty new house with all the finishing I want (!!!!) I can't help it, I want to live in a pretty house.
-keep 3b/2ba with yard (and no stupid pool)
-Commute (honestly biggest +)
Moving cons
- leave my awesome 10/10 neighborhood for a 7/10 neighborhood
- stress of selling current property & remodeling new property
-current house could continue to rapidly rise in value (could miss out on future gains)
- 2 properties to maintain with the duplex (one roof though)
What would you do?
Thanks for the advice. I understand I'll get some face punches with the $$ involved in this but I think in the long run this can pay off tremendously.
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