Buying an FHA multi-family that doesn't cash flow? (SFla)

10 Replies

I live in north Broward County but work near the Miami airport, so the commute is starting to wear on me. I currently rent a 1/1 and pay below market rent for my area (about $900), but I'm spending nearly $300/month in gas and tolls. I was considering buying an an duplex, triplex, or fourplex with FHA financing somewhere in South Broward near the turnpike. However, as the market down here is overheated, I'm starting to wonder if this is a good idea.

I recently came across a duplex in Hollywood with an asking price of $375k. If I put down 3.5%, my total payment (P&I, taxes, insurance, PMI) would be about $2,700. The larger unit will rent for about $2000/month. The property doesn't come close to cashflowing, but the negative cash flow is still less than I pay in rent and it would cut my commute in half and give me some tax benefits.

Your thoughts?

@JM I. How much would the unit that you will live in rent for if you were to move? 

Originally posted by @Adam Schooley:

@JM I. How much would the unit that you will live in rent for if you were to move? 

The other unit currently rents for $1125/month.

@JM I. It's a duplex and you're taking out an FHA loan, that's not a common situation to expect cash flow in, at least from the deals I've reviewed in the past two years.

If your monthly expenses will be less with this property then that in itself makes it an enticing deal. The monthly cut in expenses could be seen to some as a cash flow. You're saving "x" amount every month.

I'd also consider how much you value your time and what that extra time you will be saving will accomplish. Remember time is money and you should treat it as any other currency. Maybe all of it will go to running the property but that is your call to make. 

From an investment aspect you want to look at it strictly as a rental property, as I'm assuming you'd eventually move out and rent the other side. Many investors here in Miami don't ever see rents equaling 1% of their purchase price although that seems to be the mark you'd want to consider aiming for. This would mean negotiating purchase price to 312K would be ideal (not sure how feasible).

Hope that provides some food for thought. Hopefully someone with more experience than me chimes in and corrects anything I may have overlooked.

@Gabe Amedee has very good points. Time is money.  I believe you're going for the house hacking strategy.  I did the same thing in Fort Lauderdale with a duplex and it worked out great.  I saved a ton of money while I was living there.  I bought a another property this year and have both sides of the duplex rented out and the property cash flows every month.  The 1% rule here in the tri-county area is almost non existent unless you buy a duplex in a neighborhood that you probably don't want to live in. The property that you are talking about would cash flow a little with the numbers you have given if you decide to move so thats a good thing.  Your $2,700 seems a little high to me on a loan amount of $375k. What interest rate are you using?  If you are buying as a primary residence and have good credit the rate should be around 3.5% right now. Don't forget that you can homestead only part of the property and not 100%.  Also don't forget to check for separate power and water meters.  Many of the older duplexes share utilities and you need to factor those monthly costs also.     

JM ... your are living in Broward County, you are 'thinking' of investing in  in Hollywood (still Broward County) ... yet you are tired of the commute to your job site ... it would make more sense for you to seek an 2/3/or 4 unit complex in DADE COUNTY!  Cut your commute!  On less of  course your intention is to quit your present job ...  you have to decide what's in your future!

Do it.

You still have others paying the majority of your expenses.

Originally posted by @ED Marchand :

JM ... your are living in Broward County, you are 'thinking' of investing in  in Hollywood (still Broward County) ... yet you are tired of the commute to your job site ... it would make more sense for you to seek an 2/3/or 4 unit complex in DADE COUNTY!  Cut your commute!  On less of  course your intention is to quit your present job ...  you have to decide what's in your future!

I have no interest in living in Miami-Dade. I work in Doral, which is prohibitively expensive for no good reason, and I don't speak Spanish. I prefer to be more centrally located in case a different job opportunity presents itself in either Broward or Miami-Dade in a few years. It takes me longer to get in and out of Doral than it does to drive 20 miles on the turnpike.

Originally posted by @Adam Schooley :

@Gabe Amedee has very good points. Time is money.  I believe you're going for the house hacking strategy.  I did the same thing in Fort Lauderdale with a duplex and it worked out great.  I saved a ton of money while I was living there.  I bought a another property this year and have both sides of the duplex rented out and the property cash flows every month.  The 1% rule here in the tri-county area is almost non existent unless you buy a duplex in a neighborhood that you probably don't want to live in. The property that you are talking about would cash flow a little with the numbers you have given if you decide to move so thats a good thing.  Your $2,700 seems a little high to me on a loan amount of $375k. What interest rate are you using?  If you are buying as a primary residence and have good credit the rate should be around 3.5% right now. Don't forget that you can homestead only part of the property and not 100%.  Also don't forget to check for separate power and water meters.  Many of the older duplexes share utilities and you need to factor those monthly costs also.     

My FICO is 799 and I've never owned real estate before. I just assumed a 3.875% interest rate.

Finding a good realtor down here may be the bigger issue. I tried contacting one through Redfin over a week ago. He hasn't gotten back to me yet.

@JM I. Your interest rate is going to be right around 3.5% with that credit score.  I am a realtor and I am an investor so I would be happy to help you find a good cash flowing property in Broward.  I completely agree with not living in Miami-Dade county.  The traffic is horrible to say the least.  Working in Miami-Dade and living there are two different things. 

@JM I. I say, "Go for It!" When you're house hacking, the hope is that the rent you get will cover all your mortgage and utility expenses and you get to live for free. I think you're unlikely to find that in the Miami-Broward area unless maybe you get a triplex or fourplex or go to an area you don't really want to live. You'll still end up paying less per month than what you pay for rent now, especially with all your commuting expenses.

You might also want to consider Airbnbing the other unit (allowable in Hollywood if you're zoned MF and you get a $200 permit) and bump up the rent that way.

It's funny. I actually live by MIA (near Miracle Mile in Coral Gables) and am investing in Hollywood. Just got a contract last week on a duplex near Young Circle. PM me and let's talk!

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