First Multi-Unit Move (4-Plex) Deal or No Deal?

Question

Good Morning BP Community!

Thanks for stopping by.  My sister and I have saved enough money to go in on a deal together. We're looking at a two story 4 unit apartment home in El Paso, Texas.  The building was built in 2015, is new and is fully rented.  Below are pertinent details:

Price:  $300k

Down payment:  $75,000

Taxes:  $6,800.00

Rent:   $800.00 (800 x 4= $3200 monthly)

Water fee:  $50.00 (50 x 4 = 200 monthly)

Mort:  $1300 @ 30 years, 4.5%

Water Expense:  $2400.00

Additional expenses I used were:

Vacancy:  $2000.00

Electricity for outside lights:  $50.00

Maintenance $1000.00 (since its so new)

What do you guys thing?  my my calculations it should have a flow of around $11,000 per year.  Any help, comments, advice, opinions are greatly appreciated.  In addition to advice if you can recommend a lender it would be highly appreciated I'm currently working with Quicken Loans.

Thanks all for your help!!

Laci J. · Answer

We own 2 homes here in EP and currently reside here. We also own 3 in other states.

I agree that the expenses will likely be a bit higher than what is listed on a monthly basis, and then of course some months more than others. But even then, I'd buy it with that sort of cash flow.

Is this your first investment property? Since it's occupied, how do current leases look? Are they solid? Are you planning to self-manage? Do the tenants have pets, pay pet fees, no restricted breeds with your insurance company? Do you have an umbrella policy, or LLC set up?

IMO two of the most important items for having successful investment properties is to buy smart, and to have a good lease.

As @Thomas Handy mentioned - if the house is in the EPISD schools, taxes are going up thanks to the new bond that just passed. We are in a neighboring district and pay $5800/yr on a $200k home.

You can look up the taxes here in EP by address at http:// www.epcad.org/ Search. That way you can get idea what the valuation is, and know if you can plan for them to increase. Yes, they "can" increase once the sale goes through if the valuation is much lower than the sale price. Anything is possible.

Saran Mandhadapu · Answer

I am also under contract to purchase a 4 unit multi-family home and I am being quoted 4.75% with 0 points and 25% down for 30 YR mortgage. I am looking to see if I can get a better deal.

Chris O'Connor · Answer

@Saran Mandhadapu Quicken loans gave me the 4.5% interest rate owner non-occupied and no points.

Saran Mandhadapu · Answer

Hi Chris -- Which bank gave you 4.5% interest rate for a 4 unit multi-family home? Did you get it as owner occupied or non-owner occupied investment property. Did you pay for any points or origination cost? Thanks Saran

Laci J. · Answer

@Chris O'Connor - Just don't be surprised if they raise the taxes once the sale goes through. We haven't been in that situation here, but have had it happen in two other states. That being said, the valuations in some cities are light years behind. To be on the safe side, for number sake, I would go with the higher number and see if it still makes sense to you to purchase.

We use an umbrella policy. It's cost-effective and easy. I have friends who use (or have used) an LLC and there are mixed reviews. It really is a personal choice and one that takes research on your part. There are plenty of posts on here about it, if you search.

I have used First American Bank in Las Cruces. Henry Apodaca there is pretty versed in investment properties. They do all underwriting in house and then sell to Wells Fargo. If interested in his contact info, send me a PM. Or you can easily find him on Google. Tell him I sent you.

Another one I have not personally used, but a realtor friend of mine swears by, is Tanja at Fairway. Again, if you want contact info, send me a PM.

As far as Title Company, we used Stewart Title and I had zero issues with them. I'd use them again if the opportunity arose.

Do you have a buyer's agent you are working with? I also have one of those in my back pocket. She's a go-getter!

Hope that helps!

Chris O'Connor · Answer

@Thomas Handy Thanks for the input much appreciated.

@Laci J.  Thanks Laci.  Is an LLC more beneficial for tax purposes?  Do you have a preferred lender/company you work with?  I'm still shopping around for the best rate/loan.  Also is there a title company you guys recommend?

According to the tax website the best taxes should be around $6800.00 at the appraised price of $240k.

Really appreciate your help with all this and yes this is my first multiunit.  Any further input is greatly appreciated.

-Chris

Thomas Handy · Answer

I live in El Paso and the taxes would be a little higher.  I have a $300,000 home and it runs about $8000 in taxes.  It is expected to be a little higher since a bond passed last month.

Also the trash bill which I didn't see above may be included in the water bill unless there is a seperate dumpster for the 4 plex.

Chris O'Connor · Answer

@Preston Knobloch Thanks for your input Preston much appreciated.

Chris O'Connor · Answer

@Zach Quick I agree I think it would probably be around $600.  This is probably a newbie question but do taxes change based on the purchase price?  I didn't know this and if correct would definitely change things.  Thanks for your input Zach!

Preston Knobloch · Answer

I'd say those are pretty safe if you get good tenants and most of the maintenance is taken care of! Even if you'll have a account bringing in an extra $1000 a month! Goodluck and happy investing!

First Multi-Unit Move (4-Plex) Deal or No Deal?

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