First Property.....Need Insights!!

16 Replies

I really like this Tri-Plex, 30 minute drive from Philly. I want to live in one unit and rent two other.

Asking - 249000

All three units are rented.

Monthly - 2200 ( for Two units, since I am going to live in the third unit)

Taxes: $7,663
> Insurance: $3,495
> Oil: $2,600
> Management fee at 6.5%: $2340
> Sewer and Garbage: $1100
> Lawn and Snow: $900
> Water: $840
> Cleaning: $400
> Electric: $240
> Rent License: $115

> Vacancy: 2640

> Total: $ 22333.00

> Net Income is therefore 26400 - $22333 = $4067

Am i missing anything? It is my first deal, i want to make sure that I am not forgetting anything or I am under estimating the cost associating with it.

Not to forget that I will be living in the third unit as well and the income is only counting two rented units and not counting my unit.

What are your thought?

Yes your numbers look very conservative considering you probably wont need a property manager since you will be owner occupying. Looks to be a go ahead for your first property how much are you putting down? What area of town is the property in? What kind of condition is the property in? Any repairs needed?

@Skylar Dejesus

i am going for FHA so i am only putting bare minimum of 3.5% coz on the next property i would need 20% down.

property is in fairly good condition, it is only multi family home in the street of single family homes and only minor cosmetic touch ups are needed. Property is currently maintained by property manager/Realtor so every thing is up to date.   

I agree your numbers do look conservative, I might be missing something but I dont see any amount budgeted for maintenance and capex. With out knowing the building its hard to be that accurate about what reasonable numbers for those would be. But even going on the low side of 5% for maintenance and $100 per unit per month for capex (likely much more than that) with the rest of your numbers gives you a negative NOI.

Sorry I didnt mean to included capex in calculating NOI but rather a negative or close to negative cashflow after debit service even with all 3 units rented out

@Wynn Meyer

 So after Debt services, I would be looking at roughly putting $260/month to pay the mortgage. I am only counting rent(income) from two units since i am going to live in the third unit. so hopefully when I rent the third one i will have positive cashflow.

Andresa Lobrace

I was counting on the management fees to take acre of the preventive maintenance, since I am going to live there, i wont need management company there. 

What do you think about the rest?

Gotta love House Hacking! :)

A couple of thoughts.

Since your living in the building you could potentially self manage?  There is of course good and bad about that, and you would need to be very picky about tenants, but I have seen people do it successfully. 

I work out of the Cleveland area, and here some investors are starting to pass along water costs to tenants.  Several ways to do it, but perhaps you could eliminate some cost that way.

Regardless house hacking is normally a great idea! 

I know it's not typical for investors to include debt service or mortgage payments in their NOI, but that's usually when running numbers for partners or banks so that they get an accurate view of the cap rate. The reality of it is, if you are planning on living at least in part, on the cash flow, you have to include it in some form- either in your rental budget or your personal budget. A quick estimate would put your principle and interest payment around $1250 per month. Typically with a down payment that low, you would have to carry mortgage insurance, unless your appraisal comes back at 20% higher than what you are paying. I am not sure if that is waived with an FHA loan, someone else on here can certainly speak to that.

In any occasion, if you can house hack and get tenants to pay all or most of your mortgage and you are confident you are getting a good deal, then there's a good chance it will pay off in spades. I wish I would have started that way. 

Andresa Lobrace

 I am planning to split water, oil heating between all the units in coming future and after that increase will be based on how many rental inquiry comes in and how many qualified applicants, I could find. 

How do you do it at your rentals?

@Corby Goade so the reason that I want to get FHA is coz I could use less down payment on my first property. in future lets say, a new roof is needed in 60-90 days of closing the property. I will have adequate cushion. also, having extra cash on hand would help me,if any good property that comes my way.

whats your take on it?

Originally posted by @Rishi Patel :

@Corby Goadeso the reason that I want to get FHA is coz I could use less down payment on my first property. in future lets say, a new roof is needed in 60-90 days of closing the property. I will have adequate cushion. also, having extra cash on hand would help me,if any good property that comes my way.

whats your take on it?

Hey Rishi- FHA is a great option, and I would use it without a doubt for the reason you mentioned. My point was that a mortgage company will likely require that you carry mortgage insurance (typically about $100 per month) if you have less than 80% equity in the property. I am not sure if that's waived with FHA, but if you have to carry it, make sure it's in your budget. Keep at it and keep asking questions- you're going to kill it!

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