Analyzing my first deal

[Dante Barnes]

Hey everyone! My name is Dante Barnes and I am from Texarkana, TX. I am 22 years old, and just got married 3 months ago. I have been studying real estate through podcasts, books, and networking for the last 6 months and am dying to get my feet wet. A family member of mine received a large sum of money and is allocating to me $100k to start in real estate. I want to establish a portfolio of buy and hold properties and some possible BRRR's.

I currently run an Airbnb through rental arbitrage, and it has made $2k almost every month for the last 6 months(rent is $800/month). My target customer in my area is construction workers and hospital workers. I love the idea of short term rentals and would love to build my portfolio on medium and short term rentals.

My city is currently building a new hospital, which is set to bring in 6k new hospital workers. I’ve heard that this could be a great opportunity to hop into the medium term rental space. We also have a few colleges within a mile or so from the property so I could possibly rent by the room.

Anyways, for the last couple months I have been looking for a creative deal where I could buy a quad plex and house hack in it. I haven’t been able to find an actual quadplex, but I would like if y’all could analyze this deal I found and tell me what you think:

The property is listed as a “single family residential;” however, there are 3(potentially 4) units on the property. The owners thought they would live there forever so they built the other two houses as basically mother in law suites so that taxes would be lower.

The main house is a 5/3, 3100 sq/ft house with a large above ground pool with a deck around it.

The second house is a 2 story, 3/2, with a double garage(2200 sq/ft. The bottom portion has 1 bed 1 bath and a full size kitchen. The second story has 2 bedrooms 1 bath and a theatre room with a kitchenette/bar in the back of the theater room. They built the house in a way where someone could live in the bottom portion and then close off the inside stairway and split the bottom and top to turn the house into a duplex(there is outside stairs to lead up to the 2nd story).

The 3rd house is a 2/1 with a carport and 838 sq/ft.

All 3 of the houses are turnkey, they took great care of all the houses.

They are wanting 548k for the property. I have been told they are open to owner financing; however, I need help on how to set up the payment structure.

I was thinking 20-50k down, 30 year fixed, with a 3.5% interest rate. That would make my monthly payments $3400/month(with tax and insurance included).

I believe the main residence(5/3) to bring in on the low end $3k/month through short term rentals. I think the house will rent out $225/night; however, this number is based on it renting out at $150/night X 30 days = $4500 divided by 70% = $3150.

The top portion of duplex to bring in $1500/month on the low end. Me house hacking the bottom.

The 2/1 should bring in 1200/month long term and 1500-1800 month through medium term(furnish finder).

I believe this property to bring in $5,850 which makes it cashflow $2450/month.

I will put in 30-50k down payment—— 25k furnishings/updates(were good at staying on a budget)—— 25k in reserves which is about 7 months of cushion for vacancies.

Thank you for reading all that. Your opinions are greatly appreciated!

[Arif Sheikh]

Quote from @Dante Barnes:

Hey everyone! My name is Dante Barnes and I am from Texarkana, TX. I am 22 years old, and just got married 3 months ago. I have been studying real estate through podcasts, books, and networking for the last 6 months and am dying to get my feet wet. A family member of mine received a large sum of money and is allocating to me $100k to start in real estate. I want to establish a portfolio of buy and hold properties and some possible BRRR's.

I currently run an Airbnb through rental arbitrage, and it has made $2k almost every month for the last 6 months(rent is $800/month). My target customer in my area is construction workers and hospital workers. I love the idea of short term rentals and would love to build my portfolio on medium and short term rentals.

My city is currently building a new hospital, which is set to bring in 6k new hospital workers. I’ve heard that this could be a great opportunity to hop into the medium term rental space. We also have a few colleges within a mile or so from the property so I could possibly rent by the room.

Anyways, for the last couple months I have been looking for a creative deal where I could buy a quad plex and house hack in it. I haven’t been able to find an actual quadplex, but I would like if y’all could analyze this deal I found and tell me what you think:

The property is listed as a “single family residential;” however, there are 3(potentially 4) units on the property. The owners thought they would live there forever so they built the other two houses as basically mother in law suites so that taxes would be lower.

The main house is a 5/3, 3100 sq/ft house with a large above ground pool with a deck around it.

The second house is a 2 story, 3/2, with a double garage(2200 sq/ft. The bottom portion has 1 bed 1 bath and a full size kitchen. The second story has 2 bedrooms 1 bath and a theatre room with a kitchenette/bar in the back of the theater room. They built the house in a way where someone could live in the bottom portion and then close off the inside stairway and split the bottom and top to turn the house into a duplex(there is outside stairs to lead up to the 2nd story).

The 3rd house is a 2/1 with a carport and 838 sq/ft.

All 3 of the houses are turnkey, they took great care of all the houses.

They are wanting 548k for the property. I have been told they are open to owner financing; however, I need help on how to set up the payment structure.

I was thinking 20-50k down, 30 year fixed, with a 3.5% interest rate. That would make my monthly payments $3400/month(with tax and insurance included).

I believe the main residence(5/3) to bring in on the low end $3k/month through short term rentals. I think the house will rent out $225/night; however, this number is based on it renting out at $150/night X 30 days = $4500 divided by 70% = $3150.

The top portion of duplex to bring in $1500/month on the low end. Me house hacking the bottom.

The 2/1 should bring in 1200/month long term and 1500-1800 month through medium term(furnish finder).

I believe this property to bring in $5,850 which makes it cashflow $2450/month.

I will put in 30-50k down payment—— 25k furnishings/updates(were good at staying on a budget)—— 25k in reserves which is about 7 months of cushion for vacancies.

Thank you for reading all that. Your opinions are greatly appreciated!

Hi Dante,

Welcome to the world of real estate investing, and congratulations on your recent marriage! It's fantastic to see your enthusiasm and your proactive approach to learning about real estate through podcasts, books, and networking.

The deal you've come across sounds intriguing, and it seems like you've put a lot of thought into it. Here are some thoughts and considerations:

1. Creative Financing: It's great that you're exploring owner financing as an option. Given your $100k budget from a family member, it's worth discussing various owner financing structures with the seller. Your proposed structure with a 30-year fixed loan at 3.5% interest and a down payment of 20-50k sounds reasonable, but it ultimately depends on what the seller is comfortable with.
2. Property Analysis: You've provided a detailed breakdown of the potential rental income from each unit, which is essential. However, it's also crucial to consider expenses like property management, maintenance, property taxes, insurance, and vacancy rates. Running a thorough analysis will give you a more accurate picture of your potential cash flow.
3. Short-Term Rentals: With your experience in Airbnb and the new hospital development, short-term rentals could be a lucrative option. However, consider the increased management and turnover costs associated with short-term rentals. Make sure your numbers account for these factors.
4. Medium-Term Rentals: Targeting hospital workers and college students for medium-term rentals is a smart move, given your location. This strategy can provide more stable cash flow compared to short-term rentals.
5. Reserves: Setting aside $25k for reserves is prudent. Having a financial cushion for unexpected expenses and vacancies is essential for long-term success in real estate.
6. Due Diligence: Ensure that you thoroughly inspect the property, review all leases, and have a clear understanding of any local regulations or zoning restrictions that may affect your plans.
7. Exit Strategy: Consider your long-term goals. Are you planning to hold this property indefinitely, or do you have an exit strategy in mind, such as selling after a few years? Understanding your goals will help you make informed decisions.
8. Professional Guidance: It might be beneficial to consult with a real estate attorney and a financial advisor to help structure the owner financing deal and ensure it aligns with your financial objectives.

In summary, your deal has potential, but conducting thorough due diligence and seeking professional guidance are crucial steps before proceeding. Real estate can be a powerful wealth-building tool when approached with careful planning and a clear strategy. 

Best of luck!