I closed on one of two multifamily properties below in late 2013. I wanted another set of eyes to look at the deal numbers and give me some feed back on one of them. After reading this posting I am wondering if I made the right financing decision.
A little background. I hold this property along with 3 others on the side while working full time. My income from my job helps out with any shortfalls in cash flow.
Property: 4 family in Jersey City. C / D Area. Purchased Vacant as seller died prior to closing, so filling it with tenants wasn't his main goal. His kids sold property to me.
Financed 176k @ 4.125 over 15 years
Taxes are 7800 / year.
Heat: 4 seperate boilers. I pay for common lights. roughly $50 a month
Insurance: $1900 / year
Property Manager: 10% + broker fee of 1 month rent for placed tenants.
4 units are rented for total rental income of $3900 / month. two section 8's and two non section 8.
I also had to put in roughly 15k to get this property ready to rent. Walls to create extra bedrooms & closets in 3 units, painting, updated kitchens... ect Too long to detail but it was money needed to be spent.
First wanted thoughts on the overall deal and if it made sense to do a 15 year mortgage instead of 30 year. I was offered a 30 year @ 4.625. There was a difference in payment of ~$400.
What is your projected utility cost?
15 year vs 30 year. With the 30 year you will obviously cash flow better. If you have the self discipline to save all that cash flow and the desire to buy more properties then the 30 year is a good option. Interest rates are good now so it is a good time to lock them in for the long haul. However, 15 years from now you will throw a party and be loving the cash flow when that property is all paid off. Which is better depends on your goals.
176k, 30yr am, @4.625 = $905
176k, 15yr am, @4.125 = $1312
IMHO, I would have taken the 30yr @4.625. And if things went well, paid on principle like it was a 15 or 20 yr am. If things went not so good. pay it like a 30yr am.
More flexibility with less than a half point penalty.
1k / year for gas/heat since tenants pay for heat and hot water.
2k for W/S.
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