I'm working on my first multi-family investment deal since moving back to Minnesota from Wisconsin in order to start growing a portfolio locally. I found two separate unlisted 4-plexes in Uptown. Ideally, I would house-hack one of the 4-plexes, use the Home Possible Program to put 5% down and potentially purchase the second one conventional if each of the deals worked out (using the backing of a seasoned family-friend investor to assist w/ financing). Both do not have asking prices and both owners want to "cash-out" but are also worried about cap gains tax, more questions on that below.

Here are some assumed numbers:

Fourplex #1:

2BR - $1750

2BR - $1400

Studio - $800

Studio $750

Rental Income = $4,700

Vacancy 5% (assumed)

Net Rent: $4,460

Parking income = $300/mo

Washer/Dryer revenue = $1,000/yr or $84/mo

Utilities: $13k/yr

Insurance: $2,100/yr

Taxes: $8,300/yr

CapEx & Repairs: $250/mo

4 year old roof and boiler

Financing: Assume 5% down, i = 4.5%, 30yr, closing costs of 2% w/ PMI of 1%

No commissions

Fourplex #2:

1BR - $800

1BR - $850

1BR - $925

Rental Income: $3,425/mo

Vacancy 5% assumed

Net Rent: $3,254

Parking income: $270

Washer/Dryer: $500/yr or $42/mo

Utilities: $7,700/yr

Insurance: $1,500/yr

Taxes: $6,300/yr

CapEx & Repairs: $250/mo

4-year old roof, windows, siding

Financing: assume 5% down, i = 4.5%, 30yr, 2% closing costs, 1% PMI

No commissions

My questions are as follows:

- What should my offer price be on each property and what is the highest price I should be willing to pay for the properties? My threshold is 10% COC and $100/mo/unit cashflow but understand there is more potential home-hacking here and I can't low-ball in this market.

- How do my assumptions look above based on the market?

- How should I finance the properties if I wanted to buy both? (House-hack one and conventional for the other? Can you bundle your loan in that case?)

- The sellers want to "cash-out" but are worried about Cap Gains Tax (no 1031 either). Should I ask for seller financing to defer this? Any other creative options?

Thanks in advance for any help/suggestions.

Minneapolis, Minnesota

3 Votes