Owner Occupied Property Analysis using FHA (Akron, OH)

[George Turner]

Hey all,

My name is Tre and I'm just running the numbers are properties. Figured I would post this here and see what you all thought.

For this MF, they are asking $129,900 and I would use an FHA at 3.5%.

Income:

Rent - Market comps suggest ~$500/unit (It's a duplex)

Total - $1000

Expenses:

PITI - $962 (Assuming national avg for home insurance)

PMI - $155

Vacany - $90 (8%)

CAPEX - $56 (5% - windows done in 2002, new roof/gutters in 2008, furnace and A/C with separate zoning done in 2003 and electrical panel box 2013-14)

Property Management - None. Owner managed

Utilities - $25 (Garbage)

TOTAL - $1,288

Cashflow:

Monthly income - $1000

Monthly expenses - $1288

Cashflow - ($288)

COC Return:

Downpayment - $4,600

Closing - $3200 (est. 2.5% of PP)

Rehab - None

Misc - None

Total Cash investment - $7800

COC % = ($288)/ $7800 = -3.7%

Hear me out - Now I know these are not good numbers at this purchase price. But the property is in a very stable working class neighborhood with low vacancy. I suspect I could get this under contract @ $105,000 and increase rent to $600/unit

New analysis:

Income:

Rent - $600/unit

Total - $1200

Expenses:

PITI - $843 (Assuming national avg for home insurance)

PMI - $125

Vacany - $67 (8%)

CAPEX - $42 (5% - windows done in 2002, new roof/gutters in 2008, furnace and A/C with separate zoning done in 2003 and electrical panel box 2013-14)

Property Management - None. Owner managed

Utilities - $25 (Garbage)

TOTAL - $1102

Cashflow:

Monthly income - $1200

Monthly expenses - $1102

Cashflow - $98

COC Return:

Downpayment - $3675

Closing - $3100 (est. 3% of PP)

Rehab - None

Misc - None

Total Cash investment - $6775

COC % = $98/ $6775 = 1.44%

Now the listing says this has great income potential, but given this area has very slow growth, I would have to get this at a discount >25% for any real income potential which leads me to believe there isn't much here. What do you think?

P.S. this is one of my first analysis so I am sure I missed things. Any insights would be greatly appreciated.