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Subject Expert
Long winded, but it could be of value…
So we have a few properties… none of them are MFPs… but I’m familiar with what you’re looking to do…
No property pays for itself… I have a $8,000 buffer (have a mortgage) on one of ours and a $22,000 buffer (no mortgage) on another… random s*it just happens… we needed a new water heater on $8k one… could have replaced it for ~$2k… but we went with a tankless for ~$4.5k, because it needs less maintenance overtime… the other one, we received a one-time assessment for the replacement of the roof which was $6k…
Also, remember that your unit isn’t going to be occupied 100% of the time… and there is no guarantee that you can raise rent in lockstep with increased costs… you should always assume 83.3% occupancy due to turn over, and factor in all of the costs to turn it over at increased pricing… new carpet, paint, major upgrades to remain competitive…
We just had to swap out the appliances, update the kitchen and bath to remain competitive… it cost us $25k all in… but it should carry for 5-7 years minimum, but you can never be sure… and it just ate my year+ of profit…
Long story short… if you can’t achieve a CapRate (Net Income/Purchase Price) of >4% for an owner-occupied multi-family, it’s not worth it…
If you can turn a 2 family into a 3 family by renovating the basement or attic… that’s makes for a more appealing proposition… and something you should ask your realtor about…
Good Luck! Let me know if this was helpful or if you have any questions…
If you haven’t included “funds to pay for repairs if needed” into your expense estimates, then the duplex is not paying for itself.
Yes, consider how much money you’d have available to you after the purchase and how much allotted for unexpected repairs. Ie new ac unit, electrical issues etc
What makes you so confident that rent will increase YOY?
I mean would you prefer to buy a single family house and just pay the mortgage yourself? Or would you buy a duplex that pays for itself? I think it’s a pretty easy choice.
Just have at least $5k on hand at all times for repairs