Comparing COCROI with FHA vs. Conventional Mortgage

[William Wright]

Hey everyone,

I've started looking at properties in my area and have come across a 4-unit (each 2BR 1BA) going for $359,400. Average rent in the area for this layout is $1,100 and I don't want to be living above $900 for the unit I occupy (price of my current rent). Total gross rent is then $4,200/mo. My next step is to see whether a FHA loan or conventional mortgage (10% down) makes more sense. Here's my question: when comparing the two is it better to look at the COROI or the monthly cash flow?

Here's the numbers I calculated (for this situation, 50% rule has given me more conservative estimates):

Conventional: 

Cash Flow: $415.50/mo (meets $100/unit/mo minimum)

COROI: 11.57%

FHA:

Cash Flow: $292.77/mo (doesn't meet $100/unit/mo minimum)

COROI: 13.56%

Which is better - higher cash flow or higher COROI?

*for reference, my calculations yield ~$300 higher cash flow, still including 8% annual vacancy, 5% management fees, 5% CapEx