Paying 20% Down payment vs 5% (MIP of 1.5% or PMI 0.5%) on 4Plex

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Paying 20% Down payment vs 5% (MIP of 1.5% or PMI 0.5%) on 4Plex

Shopitha Kumar
Member since 2021 · 7 posts · 2 votes

HI,

I am looking to buy a 4plex  and it costs about $1.57M. I am planning to live in one unit and rent out the other 3 unit. The other 3 units are rented out and rental income is $5400 per month combining the 3 units. The property tax is 1.2%. The vacancy rate is about 4% and we are planning to use a property management company that has quoted 8%.  We will be eligible for 2.25% interest rate as this will be our Primary residence. Our current rent is $3.2K and the unit that we are occupying is about 2.5K in rent (which I didnt account in the rental income). This property has a negative cash flow if it a purely investment property( -0.5%)

1) Would this a good investment considering we will be living in this property for 1-2 years ( We definitely want to move out after 2 years MAx)?

2) Is it a good idea to apply for FHA ,request for 5% down & Pay MIP of 1.5% ) instead of putting 20% down if lets say we can grow the remaining 15% down payment money at a 8% rate ?

Kindly share your thoughts !!


-Sofia

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  • Marc Winter
    Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
    5y

    You don't say what market you are in, however, unless you can raise rents, why buy a negative cash-flow property? 

    If I understand your remark that if all 4 units were rented out, it is barely a break-even.

    Remember, there will be repairs, vacancies, etc.  

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  • Shopitha Kumar
    OP
    Member since 2021 · 7 posts · 2 votes
    5y

    The Property I am looking to buy is in Bay area. The property has a negative cash flow of -0.4% at an interest rate of 3.5% . If I bought this property and lived in one Unit, I am looking at an interest rate of 2.25% . The other thing is my current rent is $3100. The unit I am planning to live rents out at $2500 ( So I will be saving up on the rent I would pay , if I lived in one unit). The remaining three units generate $5400 in rent. 

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