I am a long time listener, fresh graduate, and a renter for ~2 years now. I am ready to finally become a homeowner; living rent free via house hack. I am very excited this has been a long time coming. But, I won’t want my excitement to cloud my judgment. I am a numbers man, engineer by trade.

The deal is a quadplex in Baton Rouge, LA. The neighborhood is a C class. Not the best but itsa quit community with good people. All units are currently rented out and 2 tenants ($650) have been there for 5 years. Local comps are ~208k-225k from within the last year. My plan is to acquire this property via a FHA loan. Please let me know what yall think about this deal. Thank you!

Quadplex:

Age: 1981, 4510 sqft.

4 units (2b/1 bath)

Asking: $211,000 (Including closing cost).

Interest Rate: 3.375%

Rent: 2 ($650) and 2 ($750) , $2800 in Rent

Mortgage: $915.93/Month (with PMI)

Utilities: 0 (tenant pay electric/water).

Flood insurance: $75/month (not in a flood zone)

Taxes: $160/month

Insurance: $144.23/ month

Monthly payment (Sum): 1,333.16/ month

Capex (5%): 140/month

Repair (5%): 140/month)

Vacancy (8%): 224/month

Property Management (10%): 280/month (I may management myself.)

Sum: 784

Cash flow = Rent – Expense = 2800 – 1333.16 – 784

Cash Flow = $683/month

What do yall think about these numbers?

Now I got an inspection last week. There was some rooting wood around doors to each unit, some mold in one unit near the water heater, missing insulation, missing cover on light switches.

(The seller will take care of these.)

Roof is relatively new 4 years old, in good condition

Rehab cost: ~$5,000 (not including Hvac below)

Now what was found is that 3 of the 4 units HVAC system is very old. They’re around 12 years old (near end of life). They also run on R-22 freon. When R-22 gets banned next year what will happen? Will I be unable to replace the freon therefore home warrant will have no choice but to replace it? I am concerned that if they go bad I may have to spend $10,000 – $20,000 for a new HVAC system. They are in working order now.

What my lender and agent recommend is a Home Warrant on the HVAC. I always hear negative things about them putting on band aide and not replacing parts. Does anyone have experience? Will they actually replace the HVAC. $500/year to replace in case sounds too good to be true.

I am also going to ask the seller for $5,000 in credit (over 3 years) in insurance for HVAC. I have the reserves to replace the HVAC if needed but it’s worth asking. I would rather use the property cash.

How are home warrants? Is it too good to be true?

What are your options on the deals? I would appreciate and advice.

Thank you BP Family!

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