Deal or No Deal: Fourplex in Virginia
In less than 30 days, when I close on this deal, this will be my first real estate purchase. My plan is to househack this fourplex.
I’ve run the numbers using the BiggerPockets calculator and my own spreadsheet. Everything points to this being a good deal. However, since this is my first deal, I’m nervous and question myself 5x a day lol. Constantly checking with my realtor, lender and property managers for their feedback on if this is a good deal. The only thing I haven’t done is post on the BiggerPockets forum. Something I've been really nervous about doing for fear of looking stupid or being criticized.
So here it is. Below you will find my full deal.
Is there something I am missing? I’d really like constructive/productive input.
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Year Built: 1794
Location: Chesapeake, VA
Downtown Norfolk: 10 mins
Virginia Beach Oceanfront: 30 Mins
Airbnb Potential: Likely no due to zoning
Existing Tenants: Yes, fully occupied
Real Estate Investing Strategy: Househack
Unit 1: 3/2 | 1200sqft | currently renting at $550
Unit 2: 1/1 | 800sqft | currently renting at $550
Unit 3: 1/1 | 700sqft | currently renting at $550
Unit 4: 1/1 | 680sqft | currently renting at $450
Asking Price: $242,500.00
Negotiated Price: $230,375.00
Seller Credits: 3.7% toward closing
Insurance: $1,711
Taxes: $1,768
Approved Loan: FHA203k @ 3.375%
Rehab Estimate: $190,000 with 10% Contingency (based on the contractor I am working with)
Total Loan: $436,500.00 (or $421,950.00 if I don't dip into renovation contingency)
Closing Date 12/21/20
Inspection: Passed
Appraisal: Scheduling (if the home comes in lower than we anticipated then going to renegotiate offer price or walk away)
Contractor: FHA approved Contractor Hired
Deal Analysis: BP Calculator Link
Renovation Plan
- Roof replaced in 2019 so all good there
- Crawlspace great condition
- Electrical updated to 100amp circuit breakers
- HVAC on Units 2 thru 4 needs to be replaced
- Replacing flooring with LVP
- Repainting the Interior
- Convert Units 2 thru 4 into 2 Bedroom
- Redoing Bathrooms and Kitchens since in bad shape
- Rehabbing yard and parking area
- Some other repairs to make the home competitive
Talked with 2 Property Managers and ran some comps
Desired Rents: $5,000/month.
Current tenants on a month to month lease with 30 day notice required. I'm going to let the existing tenants know they are welcome to reapply when the renovations are complete.Since I’m doing an FHA203k loan, and fully gutting the property, I will be giving all the tenants notice one by one within a 6 month time frame (since 203k renovations have to be completed within 6 months).
This will allow me to renovate while still getting some rental income and then charge higher rents when the renovation is over.
Unit 1: 3/2 $1,650
Unit 2: 2/1 $1,150
Unit 3: 2/1 $1,150
Unit 4: 2/1 $1,000
Thanks for all of your help!