Can You Afford This Property - Duplex

In the current economic client many ready, willing, and able home buyers are petrified to "pull the trigger" and commit to a house purchase.  The goal behind this blog is to show the low to middle income buyer how to purchase a home that will eventually be an income producing asset. 

My motivation behind a lot of properties I consider buying is the ability to live CHEAP while living in the property, and make money when you save enough money to move on to the next property. 

The largest benefit to purchasing your first property is that fantastic financing options are available.  USDA rural housing loans, and FHA loans require little to no money down so it's a great way to invest early on without needing boat loads of cash.  (USDA loans are area specific)

The key is to find a property that has more than one unit.  Realtors always promote live in one, rent the other.  We do this because it can be a great deal for a low/middle income buyer who wants to live CHEAP. 

For this example we are going to analyze a property I just listed for 185,000.  One unit is vacant and one is currently bringing in 750/mo and paying all utilities, and one is vacant (you can move into this one).  Low overhead is a key meaning you want the tenant paying as many utilities as possible.  Tenants that don't pay utilities tend to abuse them (heat specifically is horrible to pay as a landlord). 

So you might be thinking well it doesn't look amazing.  White paint is pretty cold and the wood floors need a nice cleaning.  It has 3 bedrooms and a bath upstairs.  The best part about wood floors is that you can sand and refinishing them inexpensively and in whatever color you prefer.

So let's talk about financials.  I'll point you toward the mortgage calculator on the right side of the screen (You may have to scroll up or down). 

Asking price is 185,000.  Taxes are 1195/yr, Insurance will be about 60/mo (per mortgage calculator).  For this problem we'll assume we are paying full price.   5.25% interest Rate. 

Mortgage plus Insurance per month = 1083.24

Taxes are 1195/yr so 1195/12 = 99.xx well just use 100 to make the calculation easy. 

So total payment a month is 1083.24+100 = 1183.24. 

Now one side is rented for 750 so lets do the math.  1183.24-750 = 433.24/mo. 

Now of course there are landlord responsibilities but that's a great price.  On top of all that you get the tax benefits of deducting mortgage interest on the property.  Which in most cases is a couple hundred a month off of that bold figure above. 

If you didn't think you could afford to buy, you're not considering all of your options.  If this math has opened your eyes and you'd like to take a look at this property let me know.  I'd be happy to sit down with you to go through the exact numbers for your individual situation.

Now, Adams county is going through a tax reassessment.  Taxes on this property are certainly going to go up.  However even if they triple the monthly payment before tax benefits will only be 633.24 a month.  We don't have much info about what the taxes might be until mid summer.