Buying 5 plex with home equity

[Seth Larson]

First potential deal and im looking for advice from the community

5plex in Kansas City area, under 100k, good neigborhood

to get around the commercial loan only for 4 unit and up houses this would be a cash offer from a HELOC

the house with equity is a $400k+ 3/2 in so cal, my mothers house, free and clear

income before expenses is $2,300 per mo, $27,600 per year

after expenses is around $20,000 per year

once the HELOC payment period starts i figure it would be somewhere around $500 or so, that would still leave around $1,700 in cash flow

i would be taking 15-20% for managing the manager and my mom would have the rest because she owns the house with the equity

to me it sounds great and would be a great first step to owning property, please let me know what you think

[Brent Coombs]

@Seth Larson, the way you've described it, wouldn't your mom be buying the 5plex, not you? You probably need legal and Tax advice about any benefit you would be perceived to be receiving from your mom. 

Also, I think you will find that the expenses for a 5plex will be a lot more than just $7,600. Can you share your analysis (Vacancy, Capital Expenditure, Maintenance, Property Management, Insurance, Tax)...?

"15-20% for managing the manager" might prove to be: not enough!

On the surface, your stated numbers look good. But beneath the surface?...