Buy and Hold / Duplex / Purchase under FHA, move out in a year

[Andrew Whicker]

Hi,

Hoping to solidify this deal:

Overall:

Duplex

2000 sq ft total

3 bed / 1 bath each

Contract Price: $110,000

Monthly Costs:

Mortgage Type: FHA

PITI: $810 (4.25%)

Repairs: 0.15*$1350 = $202.50

Trash / Water: $155

Income:

Rent: $1350

Capital Costs:

3 month vacancy: $3510

3.5% down: $3850

Rehab: $6000

Inspection: $500

Returns:

Cashflow: $180

COC: 15%

Cap Rate: 10.2%

Unknowns (working to solve):

ARV (post repair / garage / desert landscaping)

Timeline of getting rid of PMI (add'l $125 cashflow)

More accurate assessment of rents

Cost of a garage / add'l appraisal value / add'l cashflow

Cost of desert landscaping / add'l cashflow (~ $50 - $75 / month) / add'l appraisal value

DIY window cost (estimated as half of contractor quote)

Re-Fi costs

Knowns:

No lender fee w/ 4.25% FHA

Closing cost by Seller

Thoughts?  I don't like the cashflow being below $100 / door, but in this case it could be reasonable given the possible upgrades. I'm concerned the add'l upgrades will lower the COC too much.

Cheers,

Andy