First deal - overpriced illegal triplex (exceeds 1% rule)

[Jordan Hamilton]

Hey everyone, it’s been awhile since I posted here and really need some advice for my first deal in the Miami area (allapatta). I have been searching high and low for a deal that cashflows and I finally found one. It’s a legal duplex with an extra unit here are the numbers:

> purchase price: $400k

Income

> unit mix: (1) 3 bed 2 bath, (1) 2 bed 1 bath, (1) 2 bed 1 bath

> rents per month: 3/2 $1650 - 2/1 $1550 - 2/1 $1350 TOTAL: $4550

> financing: FHA 3.5% down

Annual expenses:

> mortgage and interest $19,205

> Insurance (home owners and PMI): $9,600

> property taxes: $6,800

> water and sewer, lawn care, trash: $5,600

> management (5%): $2,593

> vacancy: $2,730

> TOTAL expenses: $23,323

Annual Returns

Cashflow: $8,071

Principle pay down: $8,235

Cap rate: 6.82%

Cash on cash: 57%

I it's been nearly impossible to try and find a deal that meets the 1% rule and cash flows. I've given up several great deals in great areas because they end up being cash flow neutral or cash flow negative. My goal with FHA financing is to live in the unit for one year and then move out. For the analysis above I count myself as paying rent in the cheapest unit. My question is what do you guys think about the deal and the returns? Ideally I'd love to buy a legal triplex but it's extremely hard to find. I know we will need to remove the kitchen when it's inspected so it doesn't look like a unit etc.

Would you guys jump on this? Its about 50k overpriced compared to comps in the area and it does appear to need some minor exterior work.

Any advice greatly appreciated!