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Updated about 4 years ago on . Most recent reply
Analyzing first Multifamily in MA within 1.5hr from Boston & AFB
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 |
Most Popular Reply
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- Real Estate Agent
- Lowell, MA
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Your math looks pretty reasonable. Closing costs might be light but some lenders provide some big closing credits to veterans. And be careful in Revere many houses will require flood insurance.
Within greater Boston it’s very tough to find a duplex that is going to cashflow for you. The normal result on a duplex A subsidized mortgage payment when you’re living there and break even when you move out. Which is what your math is supporting. Still way better than renting and you’re getting tenants to pay down a real asset for you that is 100% leveraged. it’s definitely Not a bad thing!
In order to get positive cashflow in our market we typically needs to look at the 3-4 unit properties. The extra 1-2 units makes all the difference. In either, a good deal should should allow you to live for free and when you move out, have positive cashflow. The prices are higher but the extra rent makes up for it and the loan amounts will adjust to accommodate it.
We help many househacker get started in the greater Boston/north shore area. Because that’s what we focus on we work with partners that get it. If you’re curious to see what you’d qualify for if you stepped up to a 3-4 unit I can introduce you to a lender that will break it down for you. PM if that is something you’re interested.
Either way, househacking in my opinion is the best way to get. Goodluck and enjoy the ride.
- Jonathan Bombaci
- [email protected]
- 978-710-8611
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