Stuck on a deal... Need assistance

[Mike S.]

Looking to buy third income property and need help analyzing it.

Property Details-Asking price $565000. (Lets say the bank doesn't budge and I buy it for this amount and seller pays closing costs).

Multi-family 2 unit 1 bed/1 bath and 4 bed/1 bath. Great location! Close to large campus/student property with great downtown.  

Currently both units are rented out at $1300 for 1/1 and $2600 for 4/1. 

Have been pre-approved for $575k.  Using equity from other investment property for down payment and plan to pay off (down payment) within 1-2 yr.  

Used a mortgage Calculator=Monthly Payment= $3600 (for Mortgage, Loc, Taxes, Ins)

Doesn't include vacancy, cap ex etc. - Utilities paid for by tenants

Property is not updated and is rented until Aug. 2017. 

Property is in a great college town with multipliers around 10-12x. Average rents per bedroom $650-700; $800 when updated. 

Need help analyzing the numbers to see if it would work for me in the long run.  Long term buy & hold property.  

Thank you in advance!

[Ned Carey]

I wouldn't even consider it.  Your monthly rent is well below 1% of the sales price. This will be a negative cash flow property. 

The question is,"Is it a good property for you over the long run?" The depends on if you can easily sustain the negative cash flow and if your expectations are for substantial appreciation.

My guess is even considering appreciation this isn't a good long term investment