Miami 4-Plex Deal Help

[Leo Maldonado]

Hi All!

So I have been diligently working with Kate Tyler Hayes on finding the right 4 plex for me to start my real estate investing career. 

After a few maybes, a few No's, we FINALLY found a YES. 

Now remember that Miami is a high priced environment that moves quickly, so I want to make sure this is the right move for me. 

Purchase Price: $445,000

Loan Amt: $436,939

Interest Rate: 4%

Monthly PITI (including taxes+ Mortgage Insurance for FHA + Insurance): $2,928

Current Rents: $3700

Goal: $4600

Vacancy: 5% Allowance

Repairs: 5% Allowance

Monthly Cashflow: $1,063.36

BIGGER POCKETS CALCULATOR

Monthly Income:$4,600.00 (projected after raising rents)

Monthly Expenses:$3,536.64

Monthly Cashflow:$1,063.36

Pro Forma Cap Rate: 8.12%

NOI:$37,362.00

Total Cash Needed:$28,575.00

Cash on Cash ROI:44.66%

Purchase Cap Rate:8.40%

Any input? Looks like a turnkey property to me as its newer built in 1968, and has a new roof + some updated interiors. 

[John Leavelle]

Howdy @Leo Maldonado

$8,061 for a down payment is extremely low. If this is a conventional loan it should require a 25% down payment ($111,250). Why is the loan for $436,939? You mention FHA, are you using a FHA loan? Minimum down payment is 3.5% ($15,575).

What makes you think you can raise rental income to $4,600?  Are current rents below market rates?  Are you planning to make upgrades?

If this is a FHA loan you will be required to live in one unit for at least one year. That has an impact on your rental income.

You did not include CapEx or Property Management in your analysis. These are two major items that you should always account for. Even if you are self managing. You also did not include any utilities or lawn care expenses. Your Cash Flow looks way too optimistic. Better be sure what actual numbers are.

Are you sure it's turn key and no repairs needed.  Be sure to have property inspected.

Your numbers are confusing. Where did you get $37,362 NOI? Using your current rents ($3,700) minus your listed expenses, Vacancy and Repairs, ($370) = $3,330 NOI ( $39,960 annual) minus your PITI plus PMI ($2,928) = $402 per month Cash Flow ($4,824 annual). As you should see if you include the other expenses your numbers will not look as optimistic.

If you use the 50% rule for your expenses you will have negative Cash Flow.  $3,700 * .50 = $1,850 Expenses

NOI = $3,700 - $1,850 = $1,850

Cash Flow = $1,850 - $2,928 PITI/PMI = - $1,078

Just showing you how not having your numbers correct can cost you.

Please reevaluate your data before committing to the purchase.