Owner Occupant 4-plex Advice

[JP P.]

Hello BP folks, I would like some advice on potential property, here is my background and details.  I would move out of my current home and live in 4-plex

Currently living situation is SF home

1. Mortage - 1,000 (with HOA and rounding up on mortgage)
2. Potential Rent - 1350 (1300-1400 low to high season)
3. Likelihood of renting w/in 45 days - 70%

Potential 4-plex

1. selling price - 220,000 (would only do deal if they would come down to less than 215,000)
2. 3 occupied/1 vacant rent - 550 on month to month (1,650 p/mo);  current tenants are long term tenants;  rental market calls for 750-800
3. HOA - optional at 360 p/mo
4. Would purchase with 5% down ( 10,750)
5. I would do a 15yr loan to pay it down sooner
6. Appraisal is probably 230k. Will it appreciate? maybe at 250k in 10yrs or stay the same
7. And if I purchase this place my cash reserves would only be 5K max (and then I would be spreading that across 5 units)

What are you thoughts, understanding I will need to do more of a due diligence to confirm this is truly a good deal.  I feel like the numbers look good especially if/when I raise the rent to the market value.  And I would use savings on lower out-of-pocket and profit from SF to pay down principle on SF, then work to pay down principle on 4-plex.

Thanks,

Jeremy

[Logan Hassinger]

@JP P.

Forget Cap rate all together it isn't used in 4-units or less. 

1. Why does the deal hinge on 5k difference in purchase price?

2. Current rents don't support purchase over  180k. You shouldn't be paying the seller for the value YOU will create. 

3. Do extra due diligence on why you believe rents can be pushed so high based on current rents? A property attracts tenants, there's nothing you can do to attract the tenants you want. 

4. Why 15yr over 30yr? Why not do a 30yr and pay extra each year? Don't force yourself in to larger payments, just be diligent with how you set aside extra principal repayment cash.