All Forum Posts by: Cliff Sands

Really appreciate you taking the time to explain this.  I'm not sure I totally understand all of it.  In particular the 21,380.  The calculation is deducting interest from the equity but that interest is already paid through the rents.  That is to say...fast fwd to 2025, the property is valued at 690,000 and the outstanding balance is 546,775.  Accounting for closing costs...143,225-34,500 = 108,725. Why would also subtract out the interest that was already paid over the previous 5 years? 

Thanks all for the replies so far. I may have skipped a few details on the explanation, my apologies. The list is $575k but the $4000/mth mortgage payment takes into account the total acquisition cost (VA fee, closing, etc.) The actual note would be around $610-615K.

It seems this may not cashflow quite like I thought as I may have underestimated some of the holding costs namely the management/turnover fees. At 10% management fee and 4-5% annually for acquisition costs that would leave little room for any repairs/maintx even though they may be minor with a new build. On the other side however, I’ve been rather conservative in my rents estimate and $1250-1300 is achievable especially for the end units which are a tad bigger and afford only sharing of one wall (I would live in a middle unit).

If I were to forgoe the immediate cashflow, assuming rents could increase yearly, the deal should still net a decent 5 yr ROI from the mortgage buy down and appreciation. I use 5% annual appreciation in this market as it seems to average out, long term, here. The buy down would put me at $550k remaining on the note; leaving a delta of about 150K year 5. At half the appreciation it's still $100K equity at year 5.

RE: Guifre

1) Purchase: $575,000

2) Total Annual Operating Income: $43,000 (1,200x3x12)

3) Total Annual Operating Expense:

a) % Vacancy: 5%

b) RE Taxes Property: 15K

c) Hazard/Insurance: 2K

d) Repairs & Maintenance: 200 – first 2 years (warranty) / 1000 – annually after

e) CapEx: 0

f) Utilities-other: 0 – tenant pays all utilities/lawn, etc.

g) HOA: 0

4) Actual Capitalization Rate: not positive on this but anticipating 5%/annually

5) Loan Information

a) Down Payment: $0

b) Loan Amount: $575,000

c) Acquisition Costs and Loan Fees Rehab Funds: 35-40K

d) Length of Mortgage (years):30

e) Annual Interest Rate: 3

6) KPI's: don’t know what this is (key performance indicators?)

a) DSCR:

b) 1% rule: 5750/month – hard for new build this is closer to 0.08

c) 50% rule:

d) Cashflow (before taxes): 2200/mth

e) ROI: well it's no money down so calc would say infinite?

Thanks again for all the feedback…please keep firing away with the back n forth analysis, it’s much appreciated.

@joseph – this is the unit at showdown path

Hi Hendrik,

I’m new here too so I’m not sure I’m much help but I’m in a similar position as you…looking to do my first deal. From all the podcasts and youtube video’s I’ve watched as well as books read, it does seem like the “live-in” house hack is one of the most recommended ways to get started. I’m looking to do something similar.

What type of financing are you thinking of using? Do you have the appropriate amount of cash reserves for a down payment? What about 6 months reserve for the property itself?

I’m really having a hard time finding a negative about doing a “live-in” house hack. I would think if you maybe don’t buy it right, use the calculators on BP, or if maybe the reno gets in over your head…but other than that it seems like a great way to get started.

Best of luck, and please update the thread on your journey…would love to hear about it!

Cliff Sands

Hi bigger pockets fam…I'm REALLY new to this as in I joined the forum about a week ago. I have an opportunity I would like to get some perspective on if you wouldn't mind. I located a new construction 4-plex in an area I am familiar with, list price is $575k. I exploring the use of my VA loan to finance the entire amount, no money out of pocket. The mortgage with P&I, and Tax would be roughly $4000/mth. Each unit rents for, conservatively, $1200/mth. I would owner occupy one of the units and rent the other three. Leaving me to pay $400/mth for my living situation. I would manage the 3 other units myself, cap ex and repairs should be minimal since it's new construction.

My goal here would be to rent the 3 other units for ~60 months, live in my unit for 24 months and then rent that unit for the remaining ~36 months. I would then look to sell the property at the 60 month point.

My numbers on mortgage buy down and appreciation suggest about $150k equity at the end of 5 years. I would look to sell and then utilize that capital to do more deals with. The equity figure does not include any cash flow I would get the final 36 months from renting the 4th unit.

Are there any glaring omission in my analysis? Any and all thoughts appreciated!