Quadplex Analysis- FHA, 3.5% down, will manage myself

[Alex Ballas]

Hi everyone- long time reader, first time poster. I started reading all the books, blogs, and podcasts about 2 years ago, and am ready to get into the REI game here with a quadplex!

I’ve done my best to catch all expenses and am looking at about $400/mnth cashflow, or about -300/mnth cashflow when I live in the building. The building is not in great shape, but the rents seem solid. Mostly low income section 8.  The units also not great, but they have rented for the last 4 years with an eviction, and 2 mnths vacany.  The seller has owned the building for 10 years and says he wants to invest in some other opportunities.

I will be the onsite property manager so will be living basically rent free. Is this worth the hassle? Am I overpaying? It was listed at 335K, I negotiated to 310 with all buyer costs covered by seller. FHA 3.5% down, about 11K

Thoughts? I am excited by the opportunity but need your expert opinions here--  thanks in advance!

Alex

Rental Income 2015	41316.00
Subtract Vacancy 5%	39250.20
RENTS 2015.00 910.00 873.00 860.00 800.00 Expenses
Property Insurance	1834.00
Taxes	3350.00
Total Insurance/Taxes	5184.00
Legal
Legal Fees	120.96
Evictions	177.19
Permits	344.00
Total Legal	642.15
Maintenance
Labor	1650.00
Appliances	250.00
Lawn & Snow	307.50
Materials	1570.00
Pest Control	400.00
Total Maintenance	4177.50
Utilities
Gas/Electric	1860.00
Trash Disposal	1184.00
Water & Sewer	2006.03
Total Utilities	5050.03
Total Expenses	15053.68

Principal	1410
PMI	212
Mortgage Payment	1622
Cash Flow	$394.38
FHA Loan Details
310,000k
10k seller assist (covers closing costs)
3.5% down (10,850)
3.75 interest

[Brent Coombs]

@Alex Ballas, I know you have to live somewhere, but your figures do NOT show you "living basically rent free", but rather, you also said you would be out of pocket ~$300/m. And that will only get worse if your vacancy rate proves to be 10% rather than your assumed 5%.

If you don't mind living in a fourplex, surely you can find a deal that DOES give you cash flow AND free rent?

Another thing, if you check with your Lender, I think you will find that of the $1622/m mortgage, over $1000 of it will be interest-only. After 10 years, you would still owe more than $200k.

If your Lender will really lend you $310k at 3.75% interest, I believe your usage of that facility could be better served by looking for a better deal (or a much lower purchase price regarding this one). Cheers...