FHA and Cashflow

[Gary Thao]

I am looking at purchasing a fourplex with an FHA loan as my first investment. Fourplexes in my area run for $350k+. I am doing my anlysis right now on several and don't see how purchasing a fourplex can cashflow (other than raising the rents or putting a 25% down payment). I feel that this is an opportunity to get into a fourplex and later down the road be able to use tax deductions, appreciation or equity to buy down the loan (of course it also beats paying someones rent). I know this is not the way I should be doing things from reading on the forums (1% rule comes to mind), but I need some feedback as I may not of thoroughly thought of all the variables involved.

Sale Price $350,000.00
Down Payment % 0.0361
Loan to Value/Interest rate 96.5%
Down Payment (3.5%) $12,565.00
Closing Cost $2,945.20
Loan Amount $343,660.63
APR (Annual Interest Rate) 3.125%
Life of Loan (in years) 30
Payments Per Year 12
Total number of payments 360
Property Tax/Year $5,297.00
Payment per Month $1,472.16
Property Tax/Month $441.42
Hazard Insurance 41.67
Mortgage Insurance 351.82
Total Monthly Payment $2,307.06

Rent Monthly
Unit 1 (13341) - 2 Bed/1.1 Bath $700.00
Unit 2 (13349) - 2 Bed/1.1 Bath $700.00
Unit 3 (13365) - 3 Bed/1.1 Bath $850.00
Unit 4 (13357) - 1Bed/1 Bath $625.00
Total Rents: $2,875.00
Expenses to Owner Monthly
Property Management (8%) $230.00
Sewer/Water $200.00
Garbage $95.00
Landscaping
Insurance $63.00
Property Tax $-
Repair and Maintenance
Vacancy Rate (10%) $287.50
Total Expenses to Owner $875.50

Capitalization Rate (CAP) 6.86%
Market Capitalization Rate (MCAP) $350,000.00
Estimated Property Value $350,000.00
Debt Service $191,952
Return on Investment (ROI) -29.37%
Gross Rate Margin (GRM) 10.14
Market GRM 10.76
Cash on Cash -24%
Net Operating Income - Monthly $1,999.50
Net Operating Income - Annually $23,994.00
Net Profit - Monthly $-307.56
Net Profit - Yearly $-3,690.77