Upstate NY Property Analysis.
I'm looking at acquiring my first property. I'm 24 and living with a friend currently for pretty cheap. I'm hoping to buy a multi family and house hack. I found this one property that is listed as a two unit house "with potential for a third studio above the garage." The main floor & upstairs are a 4 BR with 2 baths and the basement is a 2 BR with 1 bathroom. I took a look at the property, everything appears to be solid (I know it'll still need to pass inspection). The house itself is pretty awkward - lots of additions after it was built in 1991. There are odd rooms and unique construction. Upstairs, the doorways into the bedrooms have either no door (doorway is cut off by the slanted ceiling/ wall from an addition is too close) and use a shower rod, or a trimmed down door. It's in good condition, just outdated. Seemingly original carpeting and old bathroom & kitchen fixtures. It is septic, had a boiler and two empty oil tanks, drilled well, but no separate meters in the house.
Upon visiting the property, that "potential 3rd studio" is above a large 3 car garage. It was a fully functioning unit with a separate meter. I do not understand why it was listed as "potential." So I did some more digging. Originally when the house was listed in November of 2016 ( at $475,000), it said "legal 2 family" in MLS. The listing agency has changed. The price has fallen to $339,500 now. There were no building permits in county tax records nor was there any sign of any recent construction. It also appears this was a giant family complex. The owner of the property lost her husband a few years back, is very old, and had a lot of family living at the property so there is no rental history and the house is sitting empty. On the online tax records, it's zoned as Limited Commercial. Site Property Class: "210 - 1 Family Res." Which they listed it as a legal 2 family so logically should be "220 - 2 Family Res." But I can't figure out why that is still listed on here, what the ramifications are of this, why is that third unit listed as "potential," and most importantly - how to solve this problem.
The numbers look good. As house I am house hacking, I tried to make conservative estimates and I wouldn't mind living in the third unit paying a couple hundred bucks a month which the numbers below implies. Then save up and try to acquire another one. If I were to move out and rent the studio for $800/mo then it pumps out a good amount of cash each month.
Price: $340,000
Down Payment: $16,811
Loan Amount: $330,740 @ 3.875%
Potential Rental Income (for 2 units): $1800/mo for 4 BR & $1200/mo for 2 BR (conservative estimates) - $36000/ year
Vacancy: $4000
Gross Income: $32,000
Taxes: $6300
Insurance: $1000
PMI: $2000
Repairs & Maintenance: $4000
Other Misc. : ~$2000
Total Operating Expenses: $15,500
NOI: ~ $16,500
ADS: $18,832
Cash Flow before Taxes: -$2300
I'm thinking of putting this in the "too hard pile." The location is perfect, and there isn't much else on the market right now. It just seems a little unusual. Only in May did I pay off the last bit of debt I was in and I am nervous about taking on a large amount of debt like this because I enjoy not having any payments. I don't want to be talking myself out of this, nor rushing myself into this irrationally. I have a more precise excel spreadsheet set up with a much greater analysis but the numbers I provided were estimated from that to just give the basics (may not add up exactly due to rounding).
Thank you for your time & thoughts,
Ryan