Analysis of First Deal 4 Unit, 2 House Property

3 Replies

Hi Everyone

I've been reading BP on an off for a few years, and finally took the plunge and joined a few weeks ago. My goals at this point are strictly cash-flow investing, and am looking to house hack for a few years as I'm single and have very low expenses. Here's my first analysis of a 4 unit, 2 house property. I will be living in one unit and renting out the other 3. Each Unit is 1 bed, 1 bath and the roof on the property is 3-5 years old. 

(I'm probably a bit late to the game but I'm under contract already and just wanted to check and make sure that I ran the numbers correctly)

Price: 220k

Rents: 600 Per unit (2400/mo without me, 1800/mo with me)

Mortgage: ~1250

Insurance: 185/mo, 2200/Year

Taxes: 125/mo, 1500/Year

Est Monthly Payment (PITI): ~1575

Utilities: Owner pays Water/Sewer/Trash (avg 150/mo in 2014), Tenant pays lights, gas, heat

Vacancy: (5%) 90/mo, 1,080/Year

Maintainence: (10%) 240 

I will be managing it myself while I'm living there

Expenses: 1575+90+240 = 2,055

Rent = 1800 while I'm living there, 2400 while Im not

Cash flow while im living there: (255)

Cash flow after I move out: $345/mo

Down payment: 7700 (FHA Loan)

I Plan on staying here at least one year to satisfy the FHA requirements and then will be looking for another multi family property to purchase.

After this deal is completed, I will have ~30k set aside (plus whatever I can save over the year, I'd guess about 15k) 

I'm not concerned about the negative cashflow at this point - I've got to live somewhere and I consider the $255 my "rent" for the year while building equity.

Any thoughts/advice would be appreciated. I think I can raise the rents by at least 25/unit/mo to 625, and a gross monthly rent of 2500. With a bit of improvements and a rent increase over the time Im living in it (I enjoy this type of work in my spare time) I think I'll be able to add a bit of value to it and maybe get out of the FHA so that I can use it again.

Thanks.

Are you adding capital expenditures in to your expenses?

Maintenance at 10%.. Is this 5%repairs/maintenance and 5%cap ex?

What kind of heat/hot water systems do you have? And how old/what condition are they in. These units will be costly to replace, make sure you're setting enough money aside for these future problems. 

New roof is a positive. How about the driveway/parking space? Appliances? Flooring? Plumbing system/fixtures. 

Make sure you set enough aside for these as they will eventually break due to wear and tear. And defects. They will be costly

Other than that, the route you're taking is a great way to save money and build capital for the next one.

Good luck!

Jeff,

Always figure in property management cost, even if you plan on doing it your self, someday you may not want to, plus your time is money. so with you there subtract another 180 a month and without you there another 240 per month. so you will cash flow $100/ month when you move out. and have a negative $425 while you are there. you said the roof is new but what about the furnace and hot water heater ? painting, kitchens, baths ? you did not allow for CAPEX in your numbers if something was to go bad. try and raise your rents a little if you can, save what cash flow you can get for any emergencies before you spend it.

@Jake Henrion


Maintenance at 10%.. Is this 5%repairs/maintenance and 5%cap ex?

This was my thought. Is this too low?

What kind of heat/hot water systems do you have? And how old/what condition are they in.  

Each unit has a wall heater (gas) and a tank hot water system. The hot water heaters are looking good with the exception of one - which is being replaced by the seller prior to closing. 

How about the driveway/parking space? Appliances? Flooring? Plumbing system/fixtures. 

There is no driveway, all on street parking. All appliances (stoves) were gas and looked good, and other appliances (fridges) looked newer. There are washer/dryer hook ups but washer/dryer not included. 

Plumbing system looked good, some fixtures need work (addressed in the inspection/are being fixed prior to close)

Painting and trim have all been updated. I plan on updating the bathroom in the unit im living in while im living there.