Help Analyzing Potential Purchase

[Bryce Hacker]

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.