Economic Development · Sykesville, MD · Member since 2015 · 6 posts · 0 votes
So as I mentioned in my introductory post, I'm in the process of considering my first real estate purchase. The property in question is a 4-unit building. The plan would be for me and my partner to occupy one of the units while leasing the other four. In order to keep the costs manageable, we would plan to "pay" ourselves rent in the amount of the unit that we would be occupying.
So here's the breakdown. Let me know what you think!
Asking Price: $279,000
Offering Price: $268,500
Closing Costs: $6,000
Down Payment: $10,000
MIP Funding: $4,800
Total Loan: $274,000
Income
1x1 = $495
1x1 + den = $715
1x1 + den = $700
2x1 = $630
Gross Income: $30,480
Expenses
Financing (Principal & Interest): $15,600
Maintenance (pro-forma): $5,000
Taxes & Insurance: $5,051
Vacancy: $3,658
Total Expenses: $29,309
I know it's not exactly a cash cow, but it seems like a good opportunity to get my foot in the door, and start building up equity in a property for minimal costs. Thoughts? What am I missing?
Denver, CO · Member since 2014 · 10 posts · 1 vote
11y
Hey Steven Colella !
My initial thought is that the deal is too thin. An annual cash flow off $1,100 can be eaten up by something small in the blink of an eye. Even if you do keep it all, it's a fairly small cash on cash return for the amount of work you would have dealing with multiple tenants... Especially for the sizable piece of debt that you would be taking on.
I would suggest keeping your eye out for a deal with more wiggle room. Remember: every property is for sale even if it's not listed. Try "driving for dollars"
Denver, CO · Member since 2014 · 10 posts · 1 vote
11y
Hey Steven Colella !
My initial thought is that the deal is too thin. An annual cash flow off $1,100 can be eaten up by something small in the blink of an eye. Even if you do keep it all, it's a fairly small cash on cash return for the amount of work you would have dealing with multiple tenants... Especially for the sizable piece of debt that you would be taking on.
I would suggest keeping your eye out for a deal with more wiggle room. Remember: every property is for sale even if it's not listed. Try "driving for dollars"
Investor · MontgomeryCounty, MD · Member since 2015 · 17 posts · 5 votes
11y
Just quickly looking at the numbers, this is SUCH a tight deal that I'd call it a no go. For your FIRST deal, I'd like to see you have a little more meat on the bone. You are bound to have more problems/mistakes your first year or so and I would hate to see you get eaten up to badly. (rent $2540 = Max price $254,000 - old roof, -old furnace, etc....) In the end it is your call. Keep us posted! :D
Hartsdale, NY · Member since 2015 · 874 posts · 218 votes
11y
It's very tight but you can make it work. THere are the 2 of you so it is really a very low rent for each of you. Its a learning experience and you will earn some money from it in addition to getting a lot of experience. You can sharpen your landlording skills on it and your Do it yourself handiman skills on it. It will give you some tax benefits and pay down your principal. The rents seem low can you raise them 10%? Try negotiating the price down a little more
Economic Development · Sykesville, MD · Member since 2015 · 6 posts · 0 votes
11y
So as an update, we made an offer of $240k and requested 3% closing for the property. The owners have come back and said that they'll come down to $250k. All the other numbers above not changing, any additional thoughts on whether or not this is a good deal?