Lender · PA · Member since 2016 · 214 posts · 140 votes
Hello, I have found an opportunity to purchase a multi family (2unit) property in Bristol, Rhode Island for under 170. Conservative rents 900 potential for 1200, numbers based on 900. This would be owner occupied for a year then move out. Does not need much in terms of work right now, just small do it yourself projects.
I just want to see if the numbers work. I have posted opportunities that I was wrong on so just trying to get better and always accept the criticism! Let me know your thoughts!
Here's what I have
Purchase price: $165,000
Down payment: $5,775 3.5%
DownPayment Assistance/Grad Grant: $ 5,775
Real down payment: $0
Monthly income: $1800 (after I move out)
Yearly income: $21,600
Operating expenses using the "50% rule": ($10,800)
this would include taxes, insurance, PMI. Taxes this year were $2,549
Yearly mortgage pmts (main mortgage): ($9,012.12) $751.01 per month
Unfortunately, they suspended new applications for the ocean state grad grant in September. I was hoping to take advantage of that as well and was disappointed in finding out about this news. Also, I'm confident you can find deals that have much better cash flow. If you want to call or email me I can help you analyze deals with more precision as well. Using a rule of thumb like the 50% rule is useful for quickly analyzing a deal but a full analysis can be a lot more detailed. Message me or see my profile for my contact info. I look forward to hearing from you!
@Brett Read thanks for the response. Would love some help figuring out of this is a deal. What numbers can I provide, private message me and I'll get you them? I've been on the market for 6 months now and this is the only opportunity I've come across at a this price.
Don't forget, I am a first time homebuyer trying to get my feet moving in the investing world. I'm looking for good cash flow for a first time deal, which is why I feel good about this. I don't necessarily need a ton of cash flow right now. Also, I didn't know that about the grad grant! Too bad really, but i can put 3.5 down if need be just thinking of all options.
One thing though, you mentioned PMI. That's not normally something I remember to include but since you mentioned it... I wouldn't normally consider that part of the "50% rule" of operating expenses (which Brett is right, is good to break out, at least a few times just to see what goes into it).
I would normally consider that "below the line" of NOI and include it as an extra financing expense beyond the yearly mortgage payments.
If I analyze this with 5% down and a yearly PMI cost of 1% of the loan balance (a rough # I came up with just by Googling - it varies depending on down payment and credit rating), it drops to a yearly cash flow of $352, a 4% cash on cash return and a dangerous 1.03 debt service coverage ratio.
I'm looking at it as:
Yearly rent - operating expenses (50% or broken out) = net operating income - annual debt service (monthly P&I mortgage pmts x 12) - annual mortgage insurance premium = free cash flow
I think the most important thing which makes this a deal or no deal is the financing - how much you're going to have to put down, how much the mortgage insurance would be, what ratios the lender is going to require.
I'd recommend investigating your mortgage options before going further with this or another property. There's no point in falling in love with a property or deal if the mortgage #s aren't going to work yet. You may find that you just have to wait until you can put 20% down and avoid PMI altogether, which may make it better to wait until next year depending on your situation.
What is the property assessed at like I was looking at a property assessed at 343, placed on market at 220, offer made 190, with 20, needed for repairs returns 68% ROI.