Fourplex I'm looking at

[Daniel Okon]

Here is my deal I am looking at. It is a bank owned property that is open to owner-occupied offers for the first 1-8 calendar days. First off, any advice is definitely welcome to try to get this property. It was listed at 275k (all the details I will add to this as well) but there is quite a bit of action already and it's only been on the market since yesterday. It is likely going to have at least 15-20 offers and it has been updated quite a bit throughout. I do not have photos but I do have numbers, but it is as turnkey as you will get in a property along with coin operated laundry. It is a C-class neighborhood but could also be forced into possible B-class as the neighborhood is improving with some renovations at the nearby shopping district (walking distance). It has rentals nearby but the surrounding area is predominantly residential. Ok. Here are the numbers.

Four separate meters, electrical is good.

Asking price: 275k

Square feet: 4,500

1 unit that is 2 br/1 bathroom (1,100 square feet)

(one unit has an additional sun room (15x13) and then has an upgraded kitchen area as well as an upgraded bathroom.

3 units are 2 br/1 ba (950 sq. feet)

Assigned 1 car garage for each unit. 

Rent comps for each of these will likely be 950.00 or more (conservative number).

Here are the numbers if offered at 275k. How high would you go as an FHA property that cash flows like this?

Interest rate (as of yesterday) 3.25%

P&I: 1,197.00

Taxes: 384.75

Insurance: 200.00

Lawn care and snow removal: 150.00

Repairs: 150.00

Sewage: 100.00

Water: 100.00

Garbage: 50.00

Mortgage insurance: 184.31

Total Housing Expense: 2516.06

Rental income (1st year living at property) 950.00 x 3 plus 75.00 (coin operated laundry) = 2,925 = cashflow of 408.94 (keep in mind this is my first rental property)

Income after moving out after 1st year: 950.00 x 3 plus 1,050.00 plus 100.00 (coin operated laundry)= 4,000.00 and cashflow = 1,483.94

Similar comps are from 310k-330k in similar areas that have sold in the last 6-10 months. 

Thank you!!!!

[Dustin Heiner]

Hi @Daniel Okon!

This sounds like a very good investment for you.  If all your numbers hold up this will be a good cash flow property. 

One thing I would do is over estimate the expenses and under estimate the rents.  The reason why is you want to be ready for the worst case scenario for the property if it were to happen.  

You may not be able to keep tenants in the property at $950 so there may be high turnover. 

The expenses may not be in line either. The insurance may be more than you expect, or even the taxes.  

If you are still making good cash flow after you run your numbers with the worst case scenario, I'd say go with it!

Hope it goes well,

Dustin