Analyzing Property / Analysis Paralysis

[Ruben Rubalcava]

Hello guys,

I am new to this group and a newbie to realestate. I bought a property from a friend in 2021 at a real good discount, which cash flows very well and was obviously easy to find. Now I am looking to scale up to a fourplex in the McAllen area, and am doubting myself if this deal I have under contract will be worth it in the long run. The purchase price of the property is 467K and I am putting 3.5% down with an FHA loan. I am quoted at a fixed 6.5% interest rate and will be doing a 2-1 interest buy down paid with sellers concessions. I will live in one unit for the first year, as required, but will be coming out of pocket about $300 dollars in the first year. Rents will start at $1,050, and I should profit between $1,000 - $500 dollars as I move out, raise rents, and my interest rate goes back up to the fixed 6.5% rate in 3 years. Also, I am afraid of overpaying for this property. If it does not appraise for that amount, then I know I will negotiate it down where it makes sense. (FYI, property is in a great location with good Airbnb income capabilites)

My question is... If it does appraise, then would it be a good deal? Am I just over analyzing, or are the numbers too close to be worth it?

Any advice would be great. I appreciate your time and thanks in advance!

[Scott E.]

My rough math says your payment for PITI + PMI at a 6.5% rate is going to be around $3,500 per month on this property.

The gross rents on the place are $4,200 per month at $1,050 per unit.

Even if you were to self-manage this deal, the numbers are tight.

You need to think about repairs, maintenance, cap ex, and vacancies. After all said and done, this property probably will break even over the long term.

Would it make for a good first deal to get your feet wet? Maybe. You'll do ok long term when accounting for principal pay down, tax benefits, and appreciation. But is this a smoking deal? No.