4-plex deal analysis

[Jason Burton]

Ok so I think I finally found an ok deal to get my feet wet. Here are the numbers:

Purchase price: $71,000.
Monthly gross rents using conservative rental rates for the area (potential, currently vacant): $1600.
Rehab costs: $10,000 (I had a general contractor friend of mine check the whole place out and he said at most $10K, maybe closer to $9K)
This is a Fannie Mae foreclosure and they had it appraised before they listed it. Appraised at $90,000 in it's current condition before rehab. I don't know what the ARV would be though.

The lender I'm currently working with is a conventional lender and is requiring 25% down payment which I don't really like but I don't know how to do it any other way (at least right now, hopefully I will gain more experience and get better at using OPM).

Using the 50% rule that would leave me with $800/month to cover PITI which would be $312 ($60,750 for 30 years @ 4.625%). Property taxes last year were ~$900.

So if everything goes according to the numbers I have looked at it should cash flow around $400/month which is $100/door. The only thing I don't like is how much money I have to put down.

Anyone have any ideas on how I could make this a better deal? Is this a decent deal or do I need to keep looking? What am I missing? Brandon Turner, Will Barnard and the other pros, if you are reading this please respond. :-) Any and all feedback is always appreciated.

[Sam W.]

Jason Burton

The 50% rule covers Taxes and Insurance, so in your case the $800/month you have available every month only has to cover PI - so this deal actually looks even better.

(You would only add an additional % for taxes / insurance if they were abnormally high.)

You didn't mention utilities....do the tenants pay all their own? If not, you'd subtract your share from the $800.

Great advice by Mark Updegraff - particularly on getting one unit rent-ready at a time. Most insurance companies will allow you to switch coverage from vacant to occupied when you get 1 unit rented......this is a big reduction in your premium so it pays to get the first unit rented as soon as you can.

Also as Mark said, make sure of the rehab costs. If it pans out the way you layed it out, sounds like a solid investment.