Analyzing first Multifamily in MA within 1.5hr from Boston & AFB

[Elena C.]

Happy Holidays, BP!

I have been doing some analysis in the past few days to get ready to purchase our first multifamily. We plan to live in one unit and rent out the other one. Move out a few years after (3-5 years) to jump on our second one and get the ball rolling. Currently, we are considering getting a VA jumbo loan (& deal with all the pain) with 0% down.

I did some analysis for the Everett and Revere area. If we could purchase a turnkey duplex at less than $600,000, then we could barely cash flow when we move out. That is, no major repair/renovation. Even so, I feel like I am just forcing the math to work. Basically, if we do not buy, we will be throwing away $2300 every month into rent. We thought it is just better to buy something and put that rent to work on building equity on a home.

We are open to other areas within 1.5hr away from Cambridge and Hanscom AFB via public transportation. Any suggestions will be appreciated.

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Here is my assumptions:

1. VA loan for $600,000 at 0% down (already including the VA funding fee in the $600,000), the mortgage (P+I) will be around $2,756.24/month.

2. Closing fee: $8,000 out of pocket

3. Rent based on Redfin search:

Unit 1 (2BD/1BD) = $2,200/month

Unit 2 (3BD/1BD) = $2,300/month

5% Vacancy = $4,275.00/month as rental income
4. Operating expenses: $1,462.4

Property Management (7% of rental)	$299.25
Leasing Costs	0
Maintenance Reserve (6% of rental)	$256.50
Utilities (avg)	$210.00
Property Taxes (1.222%)	$573.68
Insurance (according to online search)	$123.00
Flood Insurance (Not in flood zone)	0
Other (HOA, Lawn Care, Trash, etc.)	0
	0
	0
Total Operating Expenses	$1,462.43

5. Net Cash flow = $56.34 (Rental Income - Mortgage - Operating Expenses)

Net Operating Income (NOI)	$2,812.57/month	$33,750.86/year
Net Cash Flow (NOI-Mortgage Payment)	$56.34	$676.03
Net Cash Flow for Owner-Occupied (Mortgage - NOI - Unit)	-$2,143.66	-$25,723.97
Months to break-even the closing cost	142	11.8
Cash-on-Cash ROI (annual rental income / total investment VA)	8.45%	Assuming the $8k out of pocket as total investment