Miami Newbie Looking to invest in Multi Family for first property

[Daniel Jodrey]

Hello!

I am looking for a Multi Family property, preferably a triplex or fourplex, as a first investment property.

I just moved to the Miami area. My overall plan/goal is to find a fourplex/triplex that needs a little work that I can get a FHA loan with 3.5% down and bundle in a 203k loan for renovations. I would live in one unit and begin the BRRRR strategy. I do not have a specific area in Miami that I am concentrating on now, more focused on trying to find a good deal. I also am interested in HUD homes and I like that many of them have a period of time that only owner occupied can place a bid which i think gives a great start against competition for my first property where i do want to owner occupy.

Can anyone let me know what they think of my plan, is there any holes or areas that wouldn't work. I also am looking for a great real estate agent that focuses on investors. Anyone in the Miami area that is new or been here for some time that has experience/tips/advice or networking possibilites; please reach out to me and let me know!

Looking forward to hearing from you all.

Daniel

[John Leavelle]

@Daniel Jodrey

From a quick overview analysis it is not bad.  I generally use the 1% rule first ($200K * .01 = $2,000). You show $2,500 for income.  PASS.

I then will use the 50% rule to establish expenses ($1,250) and check NOI ($1,250) and Cash Flow ($1,250 - $839.50 = $410.50). I like a minimum of $100 per month per unit for initial Cash Flow. $410.50 / 2 units = $205.25. PASS.

The Cash Flow you are showing is lower (more conservative - a good thing) but, still passes my initial analysis.  I would investigate further into this property.  

Try to establish a viable Market Value using comps.  Also, find out what the Rental Market rates are for the area.  Is the current rent within Market ranges or is it below.  You did not indicate the age or condition of the property.  Any Rehab required?

You did not include Property Management expense in your analysis.  Even if you are going to self manage it is a good idea (conservative view point) to always include it.  After all you time is worth something, Right!?  Additionally, you may decide to use a property management services in the future and you would still want it to Cash Flow.  Use 10% ($250) for now.

Using 10% for CapEx is fine for initial Pro forma analysis. But, once you get the property under contract you will need to have it inspected. That will provide 2 things. A complete list of problem areas that may need to be brought up to the Seller and a means to establish SOW for a contractor. It will also allow you to establish a a usable life expectancy of major components/appliances. You can use this to develop a more accurate CapEx reserves requirement.

There are additional miscellaneous expenses that will occur (Lawn care, pest control, legal, accounting, marketing, even administrative expenses).  They can add up quickly, from 5 - 10%.

Cash Flow is starting to look a little slimmer isn't it.  Do not get overly concerned.  The property is worth looking into from your numbers.

Have you been pre-qualified for a loan yet?  If not I would recommend you do.  It costs nothing, but, gives you a more accurate assessment of the type of loan you can get.  It also helps dealing with Sellers.