Fourplex in San Jose, CA

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Hello everyone, 

I would love your opinion on what you would do if you were in my situation. So the quick breakdown is I live in the SF Bay Area, I have a lead on a fourplex, where the owner want 1.5mm (I'm set at 1.45mm and think that will work), in San Jose, CA. I have the ability to get a loan at 3% with 100k down, living in one unit. The unit sizes are (1) 3 bd 2 ba and (3) 2 bd 1.5 ba units. All units are on Section 8, with rents at (1) $2,800 and (3) $1,980 respectively. Market rents could fetch (1) $3,500 and (3) $2,250. Recent fourplex, same layout, went pending with a list price of $1,599,000, with the contingent/pending days its been on the market for a 3 months.

Here are the numbers with my family living in the 3bd unit, a 5% vacany rate and $10k in expenses. 

Cap rate - 4.03% (about average for the Bay Area maybe a little low)

DCR - .65

Cash Flow - ($31,000)

Here are the numbers fully rented with rents at 3bd $3,250 and 2bd's $2,150.

Cap rate - 6.94% (over 7% is tough to find in the Bay Area)

DCR - 1.12

Cash Flow - $10,500

Please let me know your thoughts or questions. Much appreciated.

[Account Closed]

Do not battle Bob Bowling on cap rates. You will lose.