All Forum Posts by: Robert G.

Sorry, but that seems a bit naive.  $300 potential cash flow?  Without factoring in vacancy, expenses for repairs, capex, management, etc?  It doesn't take a seer to see that this property will be breakeven (or negative cash flow) with those numbers above.  I recommend getting a 30 year loan to push down that mortgage payment to a more workable number.

4K in rent?

We need more info.  Do you know how much is owed on the current mortgage?

Does your landlord still have possession as of today, or has it been foreclosed on already?

What would you estimate is the market value of the property?

The fact is, buying duplexes or small multi-family does NOT make sense in all markets.

If the purchase prices and rents are in line with what you stated in your post, you only really have 3 options that make sense: 1) don't buy a duplex, 2) find that rare gem of a deal (say a 200k duplex for 100k), or 3) relocate to an area where it does make financial sense. 

Unless you're speculating on appreciation, no need to even look into this property.

$155k purchase price for 1300 a month rent?  That means the purchase price equals 119 times the monthly rent.  Way off.  That number needs to be less than 100 before I'd even bother running numbers to see if I like the deal.

 Start by reading (and studying) this:

https://www.biggerpockets.com/renewsblog/2010/6/30/introduction-to-real-estate-analysis-investing/

This is going to vary from one market to another.

Look around at multi-family properties in the areas you're interested in.  You'll need to save up for a down payment, potentially some rehab, and you'll want some cash reserves.

You'll also need to research financing options. Conventional loans may want 20% down (though you can find ones with less), but you may qualify for an FHA 203 loan, which allows you to only give 3.5% down (though you'll have a slightly higher interest rate).

Like I said, it really comes down to the cost of entry around you.  From the little I know of Michigan, I'd think you can pull it off for 15k to 20k.  But you'll want some better advice from someone more familiar with the exact region you're planning to buy in.

 First post on BP and you're going to use it to troll?

Hattie has over 1400 votes in just 1900 posts.  Obviously this community appreciates her insight.  If your goal is to spread some pointless hate, go do it elsewhere.  The internet is plenty big enough....

Well, first of all, a four-plex is considered residential.  So, regardless of how you decide to calculate your offer, the market value of the property is estimated based on comps (not from the income stream).  So the first question I have is how much have similar properties been selling for in the area?

Now, looking beyond that, it still looks like your offer comes in a little low.  The 2% rule, which is an ideal that you should not expect to hit in Pensacola, would indicate a value of $85,000 ($1700 monthly rental income x 50).  So the property is likely to have a fair market value north of 90k.  Your 72k offer was at 2.36%, which would be amazing if you can pull it off.

Yes, the expenses appear high at first glance.  Do the tenants pay utilities?

And the low cash flow per unit is likely caused by the 20 year loan term.  A 30 year term would bring the numbers closer to the $100 a door you'd expect to see, I think.

I've got slightly different numbers (because you need to subtract the vacancy PRIOR to determining Income).  Very close, though (lower income, lower expenses, final amounts comparable).  Also, you didnt factor in any closing costs.

Anyhow, using your numbers presented above, I get:

Gross Income $35,200. Total Expenses $19,640. NOI = $15,560.

Loan Payments $13,816.  Total Cash Flow = $1,744.

$10,000 Down payment means this will be a 17.44% Cash ROI Year 1.

But you should gain about $6,332 in equity accrued.  So your total is closer to $8,075.

Which is a Total ROI of 80.78%.

Plus you're planning on paying yourself for another $3,840 for property management,

you'll actually make about $11,916 total year one.

Which is a Total ROI of 119.15%

So, with only 10,000 down, you'll theoretically recoup your entire investment during the first year of ownership. 

I don't see anything set aside for Property Management in "Expenses".

I'd recommend accounting for PM even if you plan on doing it yourself (it will take work and time, so pay yourself accordingly).  There will come a time when you wont want, or wont be able, to serve as the property manager.  When that day comes and you have to pay for the service, you'll want the numbers to still work out.