Real Estate Deal Analysis & Advice
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
Updated over 7 years ago,
Calculations with Owner Occupied
Hey BPers,
My wife and I are looking to settle down in the Sugar Land/Stafford/Missouri City area of Houston this fall. We have no real estate experience but I've been all over the podcasts for the last 8 months and reading the forums as much as possible. My goal is to get into some small multifamily property where we don't have to pay rent/mortgage every month.
Our goal would be to do owner occupied for 1 year and house hack each of the units as each tenant moved out and then raise the rents after mini renovation. After the 1 year, move to a house and rent all the multifam units.
Currently, looking at duplex, triplex and 4-plex. We both will have pretty busy jobs with the hospital and I don't want to manage more than that on our first deal.
I've been working on analyzing deals lately and getting my numbers down and I came across a few issues/questions, going to start with one here and then post more as they come up.
Example Scenario
145K Duplex on a conventional loan with rent at $700/unit.
1) With my wife and I as 1 occupant it negative cash flows like -$300 per month. Once we move out and have 2 units rented it cash flows +$400. Is this still considered a good/decent investment long term? or what if it was -100 with us living there and +600 after we moved out and placed a tenant. Paying $100 per month sounds better than $1000 or $1200 for apartment rent in my head for 1 year only.
2) In a 4-plex that is fully occupied, how do most buyers deal with the current tenants? Do they evict them or do I put them through my own screening? Can I make a contract contingent upon tenants being evicted?
3) Is cash on cash a poor calculator for buying a multi fam when using an FHA loan? Because such little money is used as down payment that any positive return looks like an enormous percentage compared to the 3.5%.
This got much longer than expected so I'm going to stop there. Thanks for all the input, much appreciated and super excited to jump into real estate investing!