Author Topic: Looking to buy first duplex with owner occupation  (Read 1533 times)

captinsnow

  • 5 O'Clock Shadow
  • *
  • Posts: 11
Looking to buy first duplex with owner occupation
« on: July 13, 2016, 02:48:30 PM »
After much deliberation I have decided that I am tired of renting and would prefer to take a step into land lording. I would like a little bit more privacy than living in an apartment with a potential investment property down the road. I also expect to be in the area for minimum the next 5-10 years.

Financial Situation:

Single
40k liquid
0 dollars in debt
Salary of 85k prior to yearly bonus
I am looking in the area of Wauwatosa, WI
It seems units across most of the area rent for ~$1000

My current plan is to get an FHA mortgage so I am not required to put 20% down. This is mostly so I can keep more money liquid in case of unexpected repairs. There are a lot of calculators out there for buying a single family home, but less for what you should be willing to spend for duplex you plan on owner occupying.

Is there any advice out there on what you would consider to be your upper bound for duplex purchase if you were in my situation? How much liquid money would you suggest keeping around for unexpected repairs?

NoNonsenseLandlord

  • Bristles
  • ***
  • Posts: 396
  • Age: 61
  • Location: Eagan, MN
    • No Nonsense Landlord
Re: Looking to buy first duplex with owner occupation
« Reply #1 on: July 14, 2016, 08:00:09 AM »
I would definitely keep 30K around.  A new roof, sewer or ?? could be 10K.  And if you get paid off, you need some cash.

Make sure you do not pay too much, that is the key.  Living in it helps justify a higher price.

captinsnow

  • 5 O'Clock Shadow
  • *
  • Posts: 11
Re: Looking to buy first duplex with owner occupation
« Reply #2 on: July 14, 2016, 08:25:59 AM »
I will assume that you mean laid off rather than paid off. But thank you for the suggestion.

Jim2001

  • Stubble
  • **
  • Posts: 203
  • Location: Los Angeles, CA
Re: Looking to buy first duplex with owner occupation
« Reply #3 on: July 14, 2016, 01:17:40 PM »
Take a look at http://forum.mrmoneymustache.com/real-estate-and-landlording/evaluating-a-rental-property/

Of course you're combining purchase of a primary residence with that of a rental, which complicates things. But, if you were to simply evaluate the selection process as a rental only, I think it simplifies things and the numbers will workout to your advantage.

captinsnow

  • 5 O'Clock Shadow
  • *
  • Posts: 11
Re: Looking to buy first duplex with owner occupation
« Reply #4 on: July 15, 2016, 07:52:47 AM »
Thanks, i'll take a look at that link!

alme

  • 5 O'Clock Shadow
  • *
  • Posts: 22
Re: Looking to buy first duplex with owner occupation
« Reply #5 on: July 15, 2016, 12:26:37 PM »
I live in an owner-occupied triplex. Definitely keep plenty of money liquid. Within months of buying our place, our tenants' toilet stopped flushing, and we had to replace the entire main sewer line for about $8000, plus spent $800 on sod to replace what was dug up. About a year after we bought the place, we had to replace the AC/heat blower and all the duct work to the tune of about $5000. And over the first couple of years, we ended up replacing all of the old appliances in the house, so we've purchased 3 refrigerators (actually, I think we got one free from a family member), 3 washing machines, and 3 driers. We DIY lots of small stuff, but these were all beyond our abilities. Even with an inspection, you never know what's been deferred or shoddily done (for example, the old pipe was terracotta from the 30s).

Our triplex makes financial sense to us because the rent from the other 2 units covers routine expenses--interest on the mortgage, insurance, property taxes, routine maintenance, and supplies for landscaping/gardening. The cash we take from our salaries (which is less than market value for our unit) pays the principal on our loan, major (voluntary/cosmetic) renovations, and the couple of major repairs mentioned above. For tax purposes, the rent we take in is more or less offset by tax-deductible costs of owning the property. I'd look for numbers like that, where what you'd be paying in rent goes toward purchasing the property, while someone else pays for most of the costs of carrying it. We also are in an area where we think the property value will increase over time, which helps, but as long as it doesn't go down much, we're way ahead of where we would be if we'd been paying rent.