4-plex+ in (North) OC for $400k - $550k: pipe dream?

Question

Is it a dream to think of purchasing a 4-plex+ in (North) OC for $400k - $550k?

Are most of the actual deals being done off the market or direct owner with the rest of the outrageous ones making their way to the online websites and agents?

I intend to purchase and owner-occupy the property

Ed Wood · Answer

We can do it owner occupied FHA 3.5% down but here's how FHA works.

1.  Either your income qualifies totally for the mortgage payment of 50% or less DTI also payment shock will be considered.  Such as you can't be living at your parents house rent free then take on a $4000 mortgage payment.

2.  If your income does not qualify for the mortgage the 3 units that are rented must debt service the mortgage and FHA only alows you to use 85% of those 3 rents.

stars and planets lining up just perfect it can be done!

Carson L. · Answer

Thank you @Steve L., @Ed Wood for the insights. Feedback like yours go a long way in evaluating the reality.

I would very much like for the purchase to be traditional and have atleast a 20% downpayment, but a FHA loan is not out of the picture as long as the property is cash-flow positive.

I am looking for a good deal and am prepared, willing and able to not only finance it but also put in any hard work required, short of a complete fixxer upper.

Ed Wood · Answer

Cheapest 4 unit in north OC is in Santa Ana at 635k the next is Placentia and Anaheim for 659k are you going FHA?

Steve L. · Answer

Sorry, that's a pipedream.

Chris F. · Answer

don't forget closing costs!

Ed Wood · Answer

Cap rates are low in OC 3-5% range.   Here's a example at 650k sales price so you can build your spreadsheet to find your utility.  If you're penciling this down to after tax factoring include depreciation.  For more reference look up IRS form Schedule E.

$22,750 Down Payment
	$627,250 Loan Amount

$3,131.77 PI Payment  30 Year fixed at 4.375%
	    $705.66 FHA MI (Loan Amount x 1.35% YR/12)
	    $677.08 Taxes (Sales Price x 1.25%YR/12)
	    $120.00 Hazard Insurance Estimated

= $4,634.51/mo

Carson L. · Answer

As I said before, qualifying for a mortgage, FHA or not should not be an issue.

The numbers will have to make sense first.

In other words, I need to find a MFR costing P such that PITI(P) <= 0.7 * (N - 1) * R, assuming 30% of gross rent in taxes, utilities etc (does not contribute to bottomline). Given MFR with N units, with rent/unit = R.

In such a case, what is the range of P and R by region in OC?

Carson L. · Answer

Thanks for giving a number that looks more more realistic in the OC market. It's quite a shock comparing the numbers to the states on the east, but I guess that's the expense of living in SoCal!

I guess the beautiful weather here makes everyone irrational around here, but as long as the weather stays the same and the irrationality continues and I am making money, I have no reason to complain!

4-plex+ in (North) OC for $400k - $550k: pipe dream?

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