Detroit suburb 4-plex analysis

[John Nelson]

This would be our first property. Am I doing these numbers right?

Owner will sell for 215K.
Gross rents = 2600
Expenses and NOI = 1300 (50% rule)
P&I = 1121 @ 4.75% 30 years

If financed 100%, we'd have 179 cash flow per month = $45 per door.

In reality, we're financing FHA with 3.5% down and would live in one of the units for the required year. After we move out, our P&I payment would be $1082, leaving us with $54 per door per month.

This seems like an okay deal to me considering the property is in a great neighborhood and will attract good tenants. The property has been well maintained and has a new furnace and roof. I think there is some potential to increase rents too.

What seems to screw it up though is that the owner pays gas and water ($2850 for 2009), and we'd have to pay ~$130 PMI each month because of our low downpayment.

The 50% rule doesn't take these expenses into account does it? If it doesn't, then it looks like we'd be cashflow negative? Right?