Looking for advice on a 5 house package. Two houses are 1b/1b, two houses are 2b/2b and the final house is 3b/1b. I would love to hear your feedback and to see if I am missing anything. The bank would give me 5 percent fixed rate for 20 years with 20% down.
Purchase price: $250,000
Total Monthly Rents: $2750
Annual Insurance: $5000
Annual Taxes: $1000
All five house are currently rented and tenants pay all utilities. I have not been in the houses yet but from the outside they look to be in pretty good shape. I have been researching rents in this area and I think their is room for increases. Please advise as to whether you think this is a deal worthy of evaluating further.
Not knowing anything about the condition of the properties, here's the quick desktop analysis:
2750/mo * 50% (rule of thumb, estimated operating expenses) leaves an estimated NOI of 1375/mo.
After you make your 50k DP, you have a loan of 200k @ 5% that gives you a monthly payment (debt service) of 1320/mo which leaves you a whopping estimated pretax income of $55/mo. Banks generally use a 1.25% debt coverage ratio for qualification based on NOI and this is only 1.04% debt coverage ratio and not a qualifying debt coverage ratio.
I think your $50k can do better than that in another investment that you haven't found yet.
NOTE: This is only a quick desktop analysis using rules of thumb. Your due diligence may prove otherwise, but on quick analysis, this appears to be NO DEAL.
Hi Derek I'm very much a newbie to all this and am doing almost the same deal, but here is how I have tried to analysis this. Please verify with someone a lot more experienced than I.
You going to loan $200,000, with $50,000 down plus closing, at 5% interest gives you a $359.00 mortgage payment per month $4,311 per year. Let say you have 10 % vacancy that would leave you with a gross income of $29,700 per year. For arguments sake lets subtract the 50% rule, $14,850 for insurance, expenses property management e.t.c. Less you mortgage $4,311 per year, that leaves $10,539. Divide by 12 months, leaves $878.25 per month divide by 5 houses, leave $175.65 per house or per door.
This is what I'm finding as well, not quite the same but close enough. Is it a deal or not?What I'm concerned about, have the previous owners neglected to keep up with capital expenditure and now dump it on you. Scratching my head.
Looks like I messed up on the Mortgage. Wow.
Thank you for the insight.
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