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Old 12-05-2009, 09:52 PM
 
609 posts, read 1,595,813 times
Reputation: 473

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I guess the time has come do some serious research regarding a duplex and I need some advice, if anyone can give it.

The story is: I went to look at one side of the duplex, listed for 130,000 plus all closing costs paid by buyer. (This is for me to live in) This is a pretty good price for the neighborhood, so I was excited. It has a nice big yard, doubly excited.

However, the owner really wants to sell the whole house for 240. I will own the identical, tenant-occupied other half for an additional 110,000.

The tenant pays 1,100 per month plus utilities.

Is this a good, or reasonable deal?

I calculated the mortgage on the additional 110,000 as 625 mo; taxes for that unit are 200/mo. Total cost to me (not counting repair and maintenance) 825/mo.

I think that my rental income will be 900 mo after taxes. (Not sure--where's the best pace to get info on that??)

It looks like the tenant will pay for themselves, but give little profit. They have been living there 7 years, and have kids in the school system, so I feel pretty sure they will stay.

Other duplexes in this pretty nice neighborhood are selling for more. I am getting a price break, believe it or not.

Rents in NJ did not skyrocket the way home prices did. For example, you can see 2-bedroom condo's on sale nearby for 185,000 and renting for 1,350/mo.

I like the house. The owner will not sell it unless I buy both halves. I like the idea of owning and controlling the whole house and being a landlord, but don't want to do something stupid or costly. I also don't want to pass up a good, or at least reasonable, opportunity to get my home for 130,000.

I appreciate any help.
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Old 12-05-2009, 10:30 PM
 
1,465 posts, read 4,779,140 times
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I think it is a good idea for a few reasons
  • Economically, it seems sound. When calculating the real costs, don't forget the income tax deductions, including depreciation. If you are living in half, you can only depreciate the other half but it will make a difference.
  • I like having control of the adjoining walls. If they make too much noise, you are in a much better position to do something about it.
  • Rents may increase over time so it will become a better investment as you go.
With the information you provided, if it were me, I would buy it
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Old 12-05-2009, 10:37 PM
 
3,191 posts, read 8,595,311 times
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I am confused- You said "The owner will not sell it unless I buy both halves"

I have to ask, is the whole thing for sale? How did you find out half was $130K? But owner wants to sell the whole thing? I mean of they want to sell the whole thing it should be listed all together....I reckon.

It could be a good deal, but you might want to talk to a tax person to gain a better understanding of having rental property.
And already having a tenant in place,. that supposedly wants to stay would probably work favorably towards getting a mortgage.
Good luck!
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Old 12-05-2009, 10:49 PM
 
609 posts, read 1,595,813 times
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Quote:
Originally Posted by crazyma View Post
I am confused- You said "The owner will not sell it unless I buy both halves"

I have to ask, is the whole thing for sale? How did you find out half was $130K? But owner wants to sell the whole thing? I mean of they want to sell the whole thing it should be listed all together....I reckon.
crazyma, I hope no one involved is reading. He put up a sign, but doesn't want his tenants to know he is selling. So when I called, he told me what he really wants. He wants to sell the whole house.

Quote:
Originally Posted by crazyma View Post
It could be a good deal, but you might want to talk to a tax person to gain a better understanding of having rental property.
....
Good luck!
I will talk to a tax person , but didn't want to pay them if people here thought it was a bad deal from the get go.

thank you so much.
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Old 12-05-2009, 10:50 PM
 
609 posts, read 1,595,813 times
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Quote:
Originally Posted by DowntownVentura View Post
I think it is a good idea for a few reasons
  • Economically, it seems sound. When calculating the real costs, don't forget the income tax deductions, including depreciation. If you are living in half, you can only depreciate the other half but it will make a difference.
  • I like having control of the adjoining walls. If they make too much noise, you are in a much better position to do something about it.
  • Rents may increase over time so it will become a better investment as you go.
With the information you provided, if it were me, I would buy it
wow, that's exciting
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Old 12-05-2009, 11:08 PM
 
1,465 posts, read 4,779,140 times
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Karen

Rental income tax can be confusing. There are some things you should know now.

All costs that you incur now while looking at the property will end up adding to your cost basis. This is good for depreciation now and will lessen your capital gains later. Both of these are positives.

If you buy the property, any costs you incur getting it ready for rental go into 'startup costs' that (over a certain amount, off the top of my head, $5000) usually have to be depreciated. This startup period ends once the unit is available for rent. You are fortunate in that the instant you close, the place is available for rent as easily demonstrated by the fact you have a tenant. So, expensable items (non depreciable) can be deducted the first year. This is probably going to be minimal for you anyway.

It may be premature to see a tax man but do keep track of all your costs including mileage while you are looking. If you end up not purchasing it, you can't write off these expenses but if you buy it, you will be glad you did
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Old 12-05-2009, 11:16 PM
 
3,191 posts, read 8,595,311 times
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Ohh he doesn't want his tenants to know he is selling???? Hmmm. Well if he wants to sell the whole thing & someone wants to buy the whole thing, then the tenants are gonna find out pretty darn quick when someone wants to see that side of the duplex! You can't exactly buy something sight unseen!

Sounds like he needs to have a heart to heart with the tenant and get everything out in the open now. Not certain about his lease, but he might have to sell it with their lease being honored...or give them proper notice. something....
Maybe one of the agents here can give some insight?
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Old 12-05-2009, 11:22 PM
 
609 posts, read 1,595,813 times
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Quote:
Originally Posted by DowntownVentura View Post
Karen

Rental income tax can be confusing. There are some things you should know now.

.....

It may be premature to see a tax man but do keep track of all your costs including mileage while you are looking. If you end up not purchasing it, you can't write off these expenses but if you buy it, you will be glad you did
This is very helpful, I will do exactly as you say. I have already paid an inspector to go through it, because it is being sold as is. I have that receipt.
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Old 12-05-2009, 11:36 PM
 
609 posts, read 1,595,813 times
Reputation: 473
Quote:
Originally Posted by crazyma View Post
Ohh he doesn't want his tenants to know he is selling???? Hmmm. Well if he wants to sell the whole thing & someone wants to buy the whole thing, then the tenants are gonna find out pretty darn quick when someone wants to see that side of the duplex! You can't exactly buy something sight unseen!

Sounds like he needs to have a heart to heart with the tenant and get everything out in the open now. Not certain about his lease, but he might have to sell it with their lease being honored...or give them proper notice. something....
Maybe one of the agents here can give some insight?
Well, it is unusual. I have not seen the other half. He does not want to show it and I may be forced to give an offer with a contingency that the tenant-occupied half is, in fact, identical and (relatively) undamaged. After I give a written offer, he will tell his tenants and I can inspect.

Or, he may trust I am serious at some point and show it anyway.

In fact--I want to honor the lease and keep the tenants, so this effort to keep them happy resonates with me. He has stated he will let us (my realtor and myself) look at the lease and take notes, but I cannot have access to personal data without a written offer.
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