Realtor making the transition to REI...Deal Analysis Feedback

[Chris Torbert]

Hi everyone, 

I have been silently observing here on BP for a little while now, rapidly educating myself on all things REI. I am a Realtor working to make the transition over to real estate investing. My ultimate goal is to build long-term wealth via buy & hold. I'm in the DFW area and have found a small multi-family that is very intriguing. I haven't seen the current lease agreements or the payment history of the current tenants, but I wanted to throw the current numbers out there, along with my tentative strategy, to get some veteran (or even novice) feedback. Here are the numbers from the BP rental calculator...thanks in advance! My entity strategy is also below. Would LOVE to hear thoughts/feedback on that as well!

Units:     2 currently leased at $475/each through March 2017

Purchase Price:     $45,000

Loan: 20% down @ 6% APR for 20 years w/ 0 points

-Looking at a 5/1 ARM for what it's worth

Current lease income:   $950/mo or $11,400/yr

Monthly Expenses:

-P&I:     $257.92 (27%)

-Insurance:     $100.00 (11%)

-Taxes:    $62.50 (7%)

-CapEx: $95.00 (10%)

-Management (paid to myself):      $95.00 (10%)

-Vacancy:     $47.50 (5%)

-Repairs:     $47.50 (5%)

-TOTAL:     $705.42 (74%) 

Monthly Cash Flow:    $244.58

CoC ROI: 23.48%

ENTITY STRATEGY:

I am thinking about using my Self-Directed ROTH IRA LLC to purchase this. Mainly because the CoC ROI is so good. Not great cash flow numbers, but i'm not overly worried about the cash flow since it's a retirement account. Also, I believe that 20% of the profits will be tax-free since it's in the Roth, and the other 80% of the profits will be taxed due to it being Unrelated Debt Financed Income. Any thoughts, or pros & cons on using this strategy to purchase the property? Am I legally able to pay myself to manage the property if it's owned by my Roth IRA? I'm fairly young, and see this as a way to grow my retirement at a very healthy rate without coming out my own pocket (yet) to do so. Any thoughts are so very appreciated. Have a great day!

Thanks,

Chris Torbert