Analysis Paralysis on House Hack

[Michael Kelley]

I have an off market 4-Plex that I have been evaluating, and unfortunately another investor has caught wind and bid up the price. The property is 4 townhomes 3 bed/2bath/1 car garage/1250 sq. ft. The closest comp rents for $950/month (3 bed/1.5 ba/1 car garage), but I believe these are top market rents, so I have ran my numbers at $850/unit to be conservative. The seller has now said that he will sell to me if I come in at $315k (the other offer is at $310k). These do not qualify for FHA because the property is zoned as individual townhomes, not a 4-plex, but a local bank is willing to do 15% down plus cover the renovation at 5.4% over 25 years. The property needs some work which I have estimated to be approximately $20k. I am not certain if this is still a good deal or if I Just lack the confidence to commit. Also, the property has 3 vacant units, and the fourth has a rottweiler, which will have to be evicted per the insurance company, so I am planning on 4 vacant units, but have not reflected that in my numbers below. I can withstand the cash outlay with my income and other cash reserves though. The current vacancy is due to some poor management changes within the last year. In my market rentals do not stay vacant long. There are typically only 1-2 two rentals available at any given time and are usually rented within 1-2 weeks of being advertised.

The numbers at a glance:

Purchase Price: $315,000

Down Payment: $47,250

Rehab:                 $20,000

Loan: $287,750 (85% LTV + Rehab)

Rent:                $3,400

Vacancy:         $272 (8%, Conservative bc rentals are hard to come by in my market)

Mgmt:              $340 (10%, this will be self managed, but factoring in regardless)

Maint/Cap Ex: $340 (10%)

PITI: $2,300

Before Tax Cash Flow: $148

If I get $950/unit, then my before tax cash flow is at $421/month

The high leverage is killing my numbers, but I cannot afford to put down much more at this time. The kicker is that even if I only got $850/month I could cover my fixed expenses with the income from the other three units, which could make this a decent house hack opportunity. Also, since this property is four individual townhomes it appraises much higher. It appraised for $400,000 back in 2012, so assuming it appraises for at least that, I could have access to additional cash through a HELOC to BRRR or flip a single family home. I have been stumbling around for too long and my indecision is killing me, so any help is much appreciated!