First time OO Rental Property! Please halp!

[James Nam]

Hello BP Community, 

Currently I am looking at property on Homepath via the First Look program that is listed for ~260k - I'm hoping that my offer for roughly ~210k will be good enough to be accepted. I'm going for the buy and hold strategy. I read and reread a lot of the analysis weblogs/forum posts and ran the calculators, but being as this is my first purchase I am not wholly confident if I'm running the numbers correctly. Please help!

That being said, here are the numbers:

 Purchase Price (Hopefully) - $210k-220k
Downpayment: 15%
Financing: FHA 203K (Conservatively $60k in reno) - 30 Years
Interest: 4.25%
Property Taxes: $10,290
Units: 3
Average Rent Per Unit: $1200-1300 (I'm willing to bite the bullet for the first year and dip into my pocket and rent out the third unit afterwards) 

The other question I had was that if (big if)  I'm running the numbers even SEMI-correctly, it looks like the numbers are well worth it. In case my offer gets rejected, whats the highest I should offer for the property so that it's still "worth" it? 

Thank you!!

[Aaron Montague]

@James Nam

I'd pay $208500 for the place.  This analysis starts with month 13.  The first one you move out and rent the room.  The nice part about the first year is that you'll only pay about $700 out of pocket to own the place.

Here's why:

Mortgage Rate 4.25%

Length of Mortgage in years 30

Monthly Mortgage payment $1,122.73 (total loan 268,500)

Taxes $857.50

Sewer and Water $100.00

Trash $75.00

Heat/Utilities $50.00

HOA/Legal $41.67

Cap Ex and Ops $175.00

Insurance $200.00

Mgmt Fee $390.00

Vacancy $315.90

Total Expenses $3,327.80

Total Revenue $3,900.00

Cashflow/month $572.20

Cashflow/year $6,866.44

Cash on Cash Return 15.00%