Refinance my primary for down payment on multi family?

Question

Currently we have a 15 year 2.25% August 2020 on Our primary home. We are currently in the process of $113,000 cash out refi 2.99% 30 year.

We would use some of the money for the down payment listed below.

Our offer got accepted on a quadplex (1 bed/1 bath) by a university:

$210,000

Down payment: $53,000 (25%)

CoC 7.36% 340$/month

550, 425, 395, 375 (1745 total) current rent

550-595 market rent.

If all were 500$: CoC 11.44% 528$/month

Should we do this deal with money from the refinance of our primary?

Brandon Rush · Answer

Hey Maritza,

Great to hear you are thinking of picking up a rental. From the numbers you mentioned, it seems like an OK deal but not a great one. With 25% down, you would probably be looking at $55k-$60k, all in at closing. This would also leave you some money in reserves. If you know your market and this will be your first rental purchase, I say go for it. With that price point, you will not be hit too hard with vacancy. But, I would not anticipate you keeping tenants for too long with 1 bedroom apartments, resulting in lots of turnover, so keep that in mind. That is probably your biggest risk here. Will you be able to sustain 2 to maybe 3 vacancies at a time? If rental demand is strong in your market, this may not be as much of a problem.

Good luck on your journey!