Owner-occupied Triplex Analysis

[Nelson M.]

Hey everyone,

I wanted to post my analysis of this potential deal to see if I can get some input on it from the veterans in case I'm doing something wrong. This is a triplex I want to move into for about one year to satisfy FHA requirements and then I'd be looking for another triplex or quadplex to repeat the process.

Triplex (1 4BR and 2 2BR)

Asking price: 180k

Rents: 900 + 750 + 750 = 2,400 (Actual would be 1,650 because I'd be living in one unit)

PITI: 1,300

Other expenses breakdown: 

Utilities (15%): 360

Maintenance (10%): 240 

Vacancies (5%): 120

Self-managed (0%): 0

Total: 720

1650 - 1300 - 720 = (370)

I would begin showing a negative cashflow of ($4,440) for the first year, then after moving out, that number would go to:

2,400 - 1300 - 720 = 380 

(potentially more than $380 because the property is in good condition and there isn't really much to repair)

Meaning that after a down payment of $6,300 plus the $4,440 of negative cashflow I will lose the first year, that leaves me at $10,740 all-in. However, the 2nd year I would have a positive cashflow of $4,560 for the year, leaving me at a 42% ROC figure, which seems pretty enticing.

My hesitation to get into this deal stems from having to spend a whole year with negative cashflow, but I understand that sacrifices need to be made in this business, and especially when it comes to owner-occupied units. Would you recommend that I get into this deal? Or should I keep looking for a property that can still cashflow while only occupying one unit?

Thanks for your help! Any advice is appreciated.

[Justin Fernandez]

I'd look at it like this, are you ok with paying rent at 380? 

Once you hit your reserves for the unit whatever amount your risk appetite can handle, you can stop feeding that fund.  So you'd make more eventually. 

But isn't that the whole point of owner occupied housing, to live nicely without much coming out of your pocket?

Are the meters separate or together? If together are you paying all of it? 

Just things to think about. Also, not a vet, just always curious about MF deals.