Quick Deal Analysis - Quad question

[Jason Abbott]

Hi All,

This will be our first purchase in real estate and we are going to use our FHA to buy a four unit building in Tampa, FL.

Is this a good deal? What am I missing or should I consider? Could I use my FHA on a future purchase and put 25% down on this?

- $215,000 sell price; 700 - 750/month rent, 100% occupied,

- New roof,

- Low B, high C valued property

- Average Cap rate between 8% and 20% in region

- Crime in area looks to be not too bad, but there is some.

Thanks for the help!

Jason

[Patrick L.]

Originally posted by @Jason Abbott:

@patrick l. It's Waters and Camden, do you know the area and what are your thoughts?

Thanks for the insight!

I would definitely call that a C area. It's not terrible and I'd have no problem buying rentals in that area but it's not an area I would chose to live in myself. If you're talking about going the FHA route you're going to have to occupy one of the units as your primary residence for at least a year.

As for the price I think it's a bit high. If you use the "50% rule" and figure 50% of your gross expected rent will go to cover repairs, maintenance, capital reserves, management, vacancy, taxes and insurance then you're looking at about $17,400/yr of cash flow figuring all 4 units rented at $725 per month. Now that's assuming no utilities are included but if you're including water, sewer and trash then I'd figure that at $200/month (I average $50/door on that bill around here on my multi's) and that would reduce your cash flow to $15,000/yr.

Figuring the $15,000 in cash flow you're at a 7 cap at $215k. I'd like the deal a lot more around $150k. If you took out a 30 year fixed loan at 5.5% and put 25% down you'd probably be looking at about $4k/yr in cash flow after debt service or about $83/door/month.