Is owner/occupier a good starting path for mult-fam?

[Kurt P.]

hi,
new to BP and have really enjoyed reading and learning. As we are about to make a first offer thought it might be good to get folks opinions of this plan. I am looking to start with a three family that I can occupy, reno, and hopefully use as leverage when I can afford to buy a second 2-4 family. Whether I stay or move to the new property, I expect my time frame on that to be 2 years or so, not quick but I think realistic to build equity. And I'm fine with a 10 year (not 10 month) goal.

I am in Brooklyn, a very expensive market, but due to a recent sale my wife and I are lucky to have a cash position, and I hope to grow it with a 3 family via cash flow, appreciation, and strong management and marketing. ( Vacancy is so low here the standards of how&what gets rented is kind of crazy, which I see as an opportunity. )

Right now we are looking at two 3 fams with similar numbers. I know these are not 'investment grade' numbers but understand my wife and I are also limiting ourselves to were we can live and work, so deals are leaner on this first step. In this scenario we are putting down a substantial downpayment to get the loan, but that also allows two rents to cover the note and keep our risk low while we save and learn. I don't expect real cash flow the first year, rather via putting our current rent into savings.

I would like to get your thoughts on this overall strategy of starting in one's backyard as a new investor, vs say renting here while the equity works somewhere else where opportunities might be more favorable. I would like to get into flipping here, but it's an expensive and competitive place to make mistakes as you learn the ropes and I don't yet have someone here I can learn from. I am including the numbers as well for one of the properties. Though we don't have a contract, this is what our target area is like.

many thanks for your thoughts!

-

Contract Price
$652,000 + $18,000 Closing Costs
Total Purchase Cost $670,000

Loan $420,000
Downpayment $250,000
Cash Reserves for Reno $150,000
All In $820,000
ARV $900,000

NOI $53,000 ( with all three rentals at 2.5% vacancy rate )
CAP 6.5% (after reno, seems in line with market here?)

Mortgage @ 4.78% $27,300 yr / $2,275 mo
Taxes $3169 yr / $267 mo
Insurance $1300 yr / $109 mo
Utilities $3,200 yr / $300 mo
Holding Costs
$35,412 yr / $2,951 mo

Gross Rents
for all 3 units = $64,800 yr / $5400 mo
2 units + us = $40,800 yr / $3400 mo