Deal analysis, is this worth it?

Question

I'm a novice investor in real estate especially multi-family property and I am needing some help to  analyse this deal. I am looking at this 4 plex for $350,000. All units are currently rented for $625/ unit, that's very low for this market area. On the high end I can increase Rent to $900/ unit. My NOI would roughly be $400/ monthly. My mortgage, taxes and insurance would be $ 2100.

Now here is the dilemma, to close on this deal I would need 20% ( 70,000) and an additional $20,000 for closing. To get these funds I would need to get the down payment ($70,000) from home equity ( line of credit) which will add $400 to mortgage. So with this information what should I do?

Thanks

Neil

Neildon J. · Answer

Thanks for the very helpful advice, I think I was getting desperate to add a mult-i family property under my portfolio even though I knew it was not the best. Thanks for steering me in the right direction guys.

Neildon J. · Answer

My concept is buy and hold. As for this market area, appreciation is very slow. So would not be the case with this deal.

Larry Turowski · Answer

So you'd basically have zero cash flow IF you can increase the rents to the high end.  This is not a deal from a cash flow perspective, but I'd look at three other things.

1) What is the property worth?  That is, how much, if any, equity will you be getting just by buying it?

2) What will you be gaining in equity each month?

3) Do you expect it to appreciate?

I don't you would be gaining enough in equity to make it a smart investment, so you better be getting a good enough deal that you could turn around and sell it for a profit once you get the rents up or you better have a strong case for it appreciating.  I don't invest for appreciation, but some investors make a killing this way.