Multi-family within a HOA Deal analysis

[Alex Kerzhakov]

Hi All,

I have an opportunity to buy a 2 family unit located within a good Homeowners Association at what seems to be a discount price. Here are the details:

Price: $98,000
Units: 2
Unit 1 SF: 1071 Unit 2 SF: 980
HOA fees: $123 per unit
Gross Rents are realistically at $800/unit, so $1600 both. I've seen similar units at $950 in the same HOA.
Taxes are about $3,200 per year or $1600 per unit.
Built in 1985, renovated in 2006 - in good condition (minimal to no rehab required).

Both units were sold in 2006 for $212,000 (yes, I know - top of the bubble). Right now it seems the area is selling retail at $70/SF compared to roughly $100/SF in 2006. This deal would price it at $48/SF, which makes me think this is a good deal...

My plan is to buy cash, and then refinance to get a mortgage out against the property to get most of my capital back. I want to keep 20,000 down as equity and take the rest out. The mortgage payment would be about $450.

If my calcs are correct, I should be clearing:

$1600 (rent) - $450 (mortgage) - $246 (HOA fees) - $267 (Taxes) - $100 (Insurance) = $537/month

Throw in $200 reserve for unforseen expenses and its $337 a month or $4044 a year. That's 20% cash-on-cash return. Should I go for it? My intuition tells me yes, but I'd like to hear what you guys think...