Purchasing a 4-plex to live in

[Jesse Holmes]

We are looking at purchasing a brand new 4-plex to owner occupy while we are stationed in the middle of nowhere, Missouri. Each unit is 2 bedroom, 2 bathroom, and the average rent on units like these is $875. The electric is divided, but the water, sewer, and trash will be our responsibility.

Elsewhere in the forums, I read that one investor would bump up to a %60 rule for expenses if he was paying the water for all units. Using that as a rule of thumb:

$3,500 monthly rents
$2,100 expenses
$1,600 debt service

This property would cashflow at -$200 per month.

Now, I did run this by the 2% rule:

3,500 / .02 = $175,000

I know that it's a rule of thumb, and I know that I'm not going to get this place anywhere near $175K. The $1600 debt service was calculated conservatively by our lender based on the asking price. The builder needs to move this property, but as you might imagine, it is taking him longer than the duplexes he built in the same area. In other words, I'm fairly certain my debt service will be less than $1,600.

I'm currently leasing a house for $750 in a town across the valley. Because we share a vehicle (until the ice goes away for good and I can ride in on the motorcycle; wee!), this means $20 a day for gas and eighteen hour days due to our schedule overlap. The 4-plex is only 5 miles away from where we work.

Tell me if I'm thinking straight or over justifying purchasing this place (with %100 financing) as a residence for the next two years.