4-5 Unit- What Would You Do?

[Nathan Barshinger]

Hey everyone, I have an opportunity to buy a 4 (possible 5th) unit in my town. It's in a good location that gets good rents and there is potential to raise the current rents.

The potential 5th unit has plumbing running to it, just needs major work. There is a shed and a 2 story garage on the property which is being rented as well as 4 coin-operated laundry machines.

Also, the seller has done a tremendous amount of work which means less repair/cap ex costs for me if I purchase it.

The only way I could make this work is if I can get an FHA loan and house hack it.

With these numbers I know it's not cash flowing much and it wouldn't be if I were to house hack. However, it is a more expensive property which means more free equity paid by tenants. I know rents are always going up, it will appreciate in the long run, there's tax benefits and there is definately room for potential value-add. Plus, inflation is through the roof and I don't have a place to put my money for it to retain its value.

Here are the numbers:

Purchase price- 370k

Monthly Taxes- $297.42

Monthly Insurance- $83.33

Water- $48

Common Electric- $35

Sewer- $156.59

Trash- $103.6

Cap Ex 10%- $341

Repairs 10%- $341

Vacancy 5%- $170.5

tenants pay their own gas and electric

4% loan w/ 10% down payment $1728.54

(I originally calculated the loan like this because that's what I could afford before trying to go the FHA route. I know this number will change based on what type of loan I can get)

$3304.98- monthly income

Unit 1 $ 810

Unit 2 $795

Unit 3 $795

Unit 4 $695

Coin Opp. $40

Shed $75

Garage-1st floor 150

Garage-2nd floor 50

Monthly Income $3410

Annual income $40,920 before expenses

Monthly cash flow- $105.02

I would be able to pay all expenses myself if I had to for almost a full year with just my savings that would be left after closing if I have $0 in rent coming in.

What would you do if you were a 19 year old in my situation?