Understanding how to profit from 4 plex.

[Chris Lo]

I need some help with understanding why i should go with a 4 plex over a SFH near Oakland county in Michigan.

I currently own a SFH for myself. My plan was to rent this out and buy another SFH for myself. Keeping the property price under $$350,000-400,000.

I have another option where I purchase a 4 plex with my friend. Perhaps the property price of $800,000-900,000. Just guessing the numbers.

If we put down $400,000 together with an interest rate of 7% (it could be higher), then im guessing the monthly mortgage with insurance and tax would be around $3,886.

If each unit rents for $1,500/month: 

Total Monthly Rental Income: 1 , 500 × 4 = 1,500×4=6,000 

Monthly Expenses: Mortgage (PITI): $3,886 

Maintenance/Repairs: $500 

Property Management: $600 (10% of rent) 

Vacancy Reserve: $300 (5% of rent) 

Total Monthly Expenses: 3,886+500 + 600 +300 = $5,286 

Monthly Cash Flow: 6,000−5,286 = $714

We split the profit in half so each person takes $357 a month..

How much should we be profiting from this in order to make it attractive to jump in? 

What can i do to make this a good business plan?

[Robert Rixer]

You can compare the numbers but the biggest factor here by far is you'd have to partner with someone which causes orders of magnitude more complexities. What happens when one wants to sell and the other doesn't? What happens if one wants to manage and does a poor job? Many a friendship has been destroyed by going into business with each other.