Advice on a multi Family Deal

[Clementene Taylor]

Hey all, just looking for a little input/number check on a potential deal. I have been looking for a nice multifamily. I plan to live on one side for about a year or two.

Duplex: 3/2 on both sides (1693 sq ft on each side), built in 1997. The duplex is located in a Class B neighborhood in Fort Worth TX. Property is in really good shape but may need some minor updates to get top rent in that area.

I plan to live in one side for a year or two but I ran the numbers as though I’m going to rent out both sides and hire a property manager.

The sellers asking price: 599K

5% down ($29,995) (Purchasing as a primary)

30 year note @4.50%: $2887.62/Month

Insurance: $160/Month

Taxes: $566/Month

Total Mortgage: $3614/Month

Rent: $2500/side

CAPX: $250/Month

Mx: $150/Month

Vacancy: $150/Month

Property Management $400/Month

--Cashflow: $435.79/Month

*Zero management cost for the first couple of years but I want to

*Both sides are currently vacant I plan to live in One side for 1 – 2 years and rent the other side out. I don’t see a problem with finding tenants because it’s in an up and coming area.

Any input/advise would be appreciated! Thanks all!

[John Leavelle]

Howdy @Clementene Taylor

Your expenses look low. Are you using percentages for Vacancy, CapEx, and Maintenance ? If so they need to be based of the full monthly rental income (when you are not living there). Vacancy should be a minimum of one month rent income (8.34%) or $417. Unless you know the vacancy is actually 3% ($150). Maintenance at 5% or $250. CapEx at 5% is ok until you have the property inspected. If you are going to include Property Management (which you should) keep it at 10% or $500. Unfortunately, using the numbers I included your Cash Flow is now - $31 per month (without you living there).

I also did not see any Private Mortgage Insurance (PMI) which is required when you have less than 20% equity (down payment) in the property.

I’m not trying to discourage you.  It is always best to be conservative when you analyze deals like this.  Do not fudge the numbers to make the deal look better than it is.  I did not evaluate the deal with you living there because if it doesn’t work fully rented why go any further.

[Clementene Taylor]

Thank John I appreciate your input.