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Ben Cohen
  • Investor
  • Wilton Manors Broward County, FL
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34
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Help analayzing my house hack deal!

Ben Cohen
  • Investor
  • Wilton Manors Broward County, FL
Posted Nov 14 2020, 05:54

Hi everyone!

After a lot of learning & reading I've made my first offer on a 4 family building in Brooklyn, here are the numbers:

Price: 1.28M (FHA 3.5% downpayment = 44.8k, closing costs = 32k -> total money down: 76.8k). Very little rehab needed, around 5k from what I can tell. New roof and water heater.

Mortgage: 5042 (P&I) + 1100 (FHA insurance) = 6142

Operating Expenses: Property Taxes (10,390) + Water/sewer (1442) + Gas/electric (3253) + Insurance (3803) = 18,888/year = 1574/month

Total Expenses: 6142 (Mortgage) + 1574 (Operating Expenses) = 7716

Rents are currently (month-to-month tenants, presumably because of Covid):

2/1 (1800) + 2/1 (1800) + 2/1 (1750) + 1/1 (1600) = 6950 total rent

However, considering the location (Brooklyn) + the fact that each unit has parking, rents should actually be:

2/1 (2400) + 2/1 (2400) + 2/1 (2400) + 1/1 (1800) = 9000 total rent

So, monthly:

Rent (9000) - Total Expenses (7716) = 1284 cash flow, this is for the case that I am not living there. While I am living there I would live in one of the 2/1s and bring in a roommate to pay 1200, so rent would be (2400+2400+1200+1800) = 7800. So cash flow is 7800 - 7716 = $84 per month, so I basically break even.

Of course, I did not account for vacancies and maintenance. But even so, on a monthly basis my housing cost would be < $500 while I'm building equity in a 1.28M property. And, once I refinance at 15% or 20% equity, I can get rid of the FHA insurance, right? Doing so would increase my cash flow by 1.1k a month.

Other potential sources of income: tenants currently go to a laundromat near the building. I could put in a coin-operated laundry machine in the basement and charge 2.50 for wash and 1.50-2.50 for dry, doing so would make a few thousand a year. Obviously not a make or break thing though.

My main concern is raising the rent up to the market rate. The tenants have been there for a long time, so that might get pushback, and I'm concerned about getting market rate rents during Covid. Is this a valid concern?

Would really appreciate any insight here as this would be my first deal ever. Thanks!

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