Second multifamily property - advice needed

[Ben Flannery]

I'm looking to buy my second rental property. My first property is a duplex that I currently live in and have renovated. Purchased for $201k with $40k down. Appraises for $217k and mortgage / rent details are:

• 2/1 - $800
• 3/1 - $950 minimum (although I currently live here)
• payment is $1050 / mo on $161k

The second property is a duplex that is next door. It is in much better shape than my current one, and would need zero renovation. The owner has yet to list it, but I know him and he is asking $230k. If he lists, the opening price will be $247k. It is a 2 unit that is slightly under-rented. I'm pretty sure I could hit the following rents:

• 1/1 - $700 (I could get tenants in immediately)
• 2/2 - $1150

The property has a partially finished basement with one extra room on each side, but I've been told these cannot be included in sqft calculations as fully finished.

Comps for this area in the past year are

• 1/1 & 2/2 sold for $203k across the street
• 2/1 & 2/1 sold for $201k next door (my current property)
• 2/1 & 2/1 sold for $180k two doors down
• 2/1 & 2/1 sold for $245k one street over

General financial information about us:

• no outstanding debt besides our current mortgage
• $80k + $50k income (not including rental income)
• $20k savings

Questions:

1. 1. Is this a decent deal regarding cash flow? The purchase price seems high, but the comps moved really quickly (1-3 days on market), and the appraisals after sale are higher than the sale price.
2. 2. Is a feasible option for getting a downpayment taking out the equity in our current rental through a HELOC? We have $40k (downpayment) + $16k (difference between sale price & appraisal) + $10k (renovations).
3. 3. Would this limit us from buying a SFH in the next two years?

My cash flow calculations (depending on final mortgage we would qualify for) are:

$46,000 down payment

$184,000 loan @ ~4% = $1175 monthly payment

$1850 rental income - $1175 mortgage - 20% vacancy & maintenance = $310 monthly cash flow

And cash on cash would be roughly:

$49600 cash invested on $3720 annual cash flow = ~8%