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Updated about 3 years ago on . Most recent reply

Help Analyzing Potential Purchase
Hi everyone, first off, I am a licensed MLO and I have my financing figured out so I don't need help with that aspect. I am looking to purchase my first home that I intend to house hack and live in short term (maybe the next 9 months or so), and I would really like some help analyzing the property for current cash flow as well as future cash flow for once I vacate the property. Initially, I was thinking that I would like to purchase a small multifamily in the greater Phoenix area. However, due to a lack of inventory and me having to use an FHA loan for multi-families (I don't have 15-25% set aside for a down payment on a multifamily that would be required with an owner-occupied conventional loan), I have not had much luck in finding anything worthwhile.
I have had a little bit of luck finding SFR's with detached casitas. Since the property is just a SFR and I will be occupying the residence, I can use a conventional loan with a minimum DP of 3% since I am a first-time homebuyer. I have gone under contract on a home where the main house is 4 bed/2.5 bath with a 1 bed/1 bath casita that is a short drive away from the up-and-coming downtown Chandler area. I have run a few scenarios, but I am worried about the potential cash flow as well as the ability to find tenants.
Just to give you a better idea of the monthly expenses, the purchase price is $570K with a 3% DP. Principle & Interest = $2,560.57. Estimated Homeowners Insurance at $65. Property Taxes = $97.68. Mortgage Insurance = $465.36 (high.... I know). Total monthly payment = $3,188.61
Scenario 1) Live in one of the bedrooms of the home and rent out the 3 bedrooms to friends at $900/room and rent the casita out for $1,200. Total rents received = $3,900. Cash flow after 5% CapX, 5% maintenance, 5% vacancy, as well as estimated utilities divided amongst the roommates, is about $30/mo. At this rate, I am barely putting any money in my pocket, but my housing payment is completely eliminated and I am able to set aside $585/mo for vacancies, maintenance, and capital expenditures.
Scenario 2) Live in the casita and rent the home out as a whole to a family. I believe I can get about $2,500/mo for the house. After the same 5% for CapX, maintenance, and vacancies, plus the estimated utilities that I will pay in the casita, I am estimating that I will have to pay about $1,200/mo (which my girlfriend and I would split). This is the least attractive option to me, but my girlfriend likes the idea of having a little bit more privacy and our own space.
Scenario 3) Move out a little later on this year and rent both the house and the casita as a whole. Again, I believe I can get about $2,500 for the house and $1,200 for the casita. After the same 5% for CapX, maintenance, and vacancies I will just about break even (utilities paid for by the tenants). Again, I am not putting much money in my pocket each month, but I am setting aside $555/mo in CapX, maintenance, and vacancies as well as gaining appreciation in the home. Plus, I will be keeping an eye on the appreciation and the equity I have built up in the home and will refinance as soon as I think I can get close to dropping the MI. At that point, I will cash flow about $450/mo on top of the money already being set aside (assuming rent prices have stayed the same).
There is also the possibility of living in the house and managing the casita as a short-term rental, or vice versa. So many options.......
This is my first deal and I feel as though I have fallen into a little bit of analysis paralysis. Am I better off just pulling the trigger and getting into the market instead of wasting time continuing to rent to find the perfect deal that may never come along? I know that your first deal doesn't need to be a home run and that time in the market can help not only make money but help me in gaining valuable experience for my next deal (which I hope to be before the end of 2022).
Seasoned investors, what would you do if you were a first-time homebuyer trying to find your first deal again? Any advice would be greatly appreciated.
Most Popular Reply

How is the STR market in the property's area? Would airbnb'ing the casita or house be realistic and provide you a larger some of cash flow?
Do you think you are buying into some equity with this property? It doesn't seem to have the ability to produce a worthwhile cash flow to invest in, even if you rent out all of the home's bedrooms and the casita. You should look into using an FHA loan on a 2-4 unit which should still allow you to only put 3.5% down.
- Joshua Janus
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