Help me analyze this deal?

Question

Hey y'all,

I've been in analysis paralysis over the past year with this multifamily house hack goal I have but I'm finally over it and ready to start making offers. I found this deal and wanted to get your thoughts. My goal in the short term is to live on the property and eliminate my $1600 rent and in the long term (10+ years) sell and collect appreciation.

I’m looking to buy a property in Dallas, TX. It’s a 4-family house ask for 675K (which my agent says is a bit high so we're fighting that out). Current monthly rent income around $5000. Property tax $187/mo, insurance $224/mo. Rents are currently $1250 each and 3/4 units are occupied. My mortgage will be ~$3900.

I'm getting an FHA so putting 3.5% down. Thoughts?

Lorenzo Prieto · Answer

This sounds like a good deal especially if you can get it under asking price! If you are currently paying $1,600 in rent now you would greatly reducing your living expenses which would allow you to save more for investments in the future! I agree with Caleb on doing inspection and appraisal and making it contingent on those to protect yourself in the event something major comes up. Also, I'm not sure what interest rate and exact money down you are planning on putting down but the mortgage payment of $3,900 seems to be a little lower than what I calculated. I'd check to be sure what your mortgage payment is going to be.

Johnny Garcia · Answer

@Anayo Awuzie Dallas County appraiser site has a tax estimator tool you can use to generate a pretty accurate estimate of what your taxes will be after closing based on the sale price. The county record for the specific property you're looking into will also show you any exemptions that are currently applied to the property you're researching. This will help you identify which exemptions, if any will be transferred or dropped off after the sale. You'll be able to qualify for the homestead since you'll live there, so when you plug in the information into the tax estimator make sure to click the homestead exemption.

This has been super helpful in generating accurate tax costs for myself, hopefully it helps you out too!

Anayo Awuzie · Answer

We found a lender who would approve me for an FHA loan for this. And the units are 1 bed/1 ba each so no shared.

I'm assuming because this property has had the same owner for awhile and never got reassessed that is why its so low as of now. But I ran the numbers with the taxes I got on the Dallas county website and it still looks feasible

Caleb Brown · Answer

Taxes seem low, they are $2,244 annually? I would assume higher if so. Are the units rented at market rate or could they be rented higher? Also the mortgage rate you put does that already include taxes and insurance? Overall if it reduces your rent from $1,600 I'd still do it. Dallas, Texas is growing so long term wise it'll do well. Do inspections and appraisal, make sure it's contingent on those

Jordan Moorhead · Answer

@Anayo Awuzie I agree on the low taxes. Look up the tax rate in that area and multiply 80% of the purchase price by the rate to get your likely tax rate

Anayo Awuzie · Answer

I was not :/ well depending on your definition of success. The numbers all made sense, even with the recalculated property taxes (which were like 4X the current taxes 😳... you all were on point with that). But I initiated the inspection and my inspector immediately found that the property was built on a foundation of completely burnt wood that they just painted over. The seller then lied about his knowledge of the burnt wood. I didn't move forward with it.

Bruce Lynn · Answer

@Anayo Awuzie    Did you move forward?   Let us know if you were successful.

Lucia Rushton · Answer

@Anayo Awuzie are you already pre-qualified for FHA for small multi-family?

Conner Olsen · Answer

@Anayo Awuzie Property taxes should be way more. Ask your agent what the average property taxes are in that area. In Austin it's around 2-2.2% which would put your yearly payment around $14,000 if it was reassessed to market value. You can increase your rent by listing those units on Airbnb, I'm doing that in Austin and I doubled my rental income.

Bruce Lynn · Answer

Taxes and insurance seem super low.  If it is a house that hasn't been sold in years, then the current taxes will go up when you buy.  I'm guessing 2.5% on $675,000 or around $1400/month taxes.  Insurance I see about .75% of purchase price or roughly $400/month.   Can you find cheaper insurance...sure...but be super careful with that.   Plenty of people had big issues with the tornadoes that swept thru north Dallas a couple of years ago and the freeze of 2020.  Those guys that are $100/month when everyone else is $400/month are the ones that don't call you back and don't pay out when you need the insurance the most.

I don't think you can use FHA at that price range.  Max is about $500,000 loan amount.

You might not even be at conforming...and may have to go jumbo.   Your lender can guide you on that...I'm just ballparking.

Rents sound high to me.   People paying $1250/month for bedrooms and shared baths and kitchen and living areas?   Possible, but I'd ask your friends and co-workers what they would pay for a bedroom and shared bath and that may give you a better idea of where your rents might be.

Help me analyze this deal?

Most Popular Reply