All Forum Posts by: Chris Crane
Chris Crane has started 0 posts and replied 2 times.
Post: Fourplex Investment
- Real Estate Consultant
- Austin, TX
- Posts 2
- Votes 0
I concur,
I use management on my properties and not only do they provide peace of mind, but they save me tons because of the staff that they have that woks buy the hour as opposed to me bidding everything by the job.
Go with a larger outfit, interview several and spend the time to get to know your manager... not the owner of the company but the actual manager. I am kind but vocal and my managers stay on top of my properties because they appreciate the business and the attitude... a lot of landlords are not kind about managing their property managers as if they earned the right to be jerks.
Post: Can I buy a fourplex or not?
- Real Estate Consultant
- Austin, TX
- Posts 2
- Votes 0
Originally posted by Jon Holdman:
Price: $600,000
Down: $150,000 (25%)
Loan: $450,000
Payment: $2697.98 (P&I only, 6%, 30 years)
Gross rents: $7,600
Expenses: $3,800 (50% rule)
NOI: $3,800
NOI per year: $45,600
Cash invested: $150,000 (plus closing costs)
Cash on cash return: 8.8%
Not an awful deal, but not a screamer, either . I'd like to see that cash on cash return up in double digits, preferable high double digits. Yours is even less with closing costs.
Now, what if buy this with OO FHA financing with 3.5% down and a 30 year, 5% loan?
Down: $21,000
Loan: $579,000
Payment: $3,108 (5%, 30 years)
Gross rents: $5,700 (only three units)
Expenses: $3,800 (these don't change, but in reality will be slightly lower since presumably you won't be a problem to yourself.)
NOI: $1,900
Cash flow: -$1,208
So, you're essentially paying a rent of $1200 instead of $1900.
I'd want to be sure to have at least $10K in cash or readily available credit to be into a rental like this.
Now, can you qualify. Not sure what current lending guidelines are, so I'll use the old fashioned 28% percent limit. Not sure what taxes and (landlord) insurance will run you on this, so I'm just going to guess it at 20% of the payment.
PITI: $3730
Monthly income: $7500 ($90K/year before taxes)
Percentage: 50%
Pretty sure that will not fly under anyone's rules.
What if you can include the rental income?
Gross rents: $5,700
less 25%: $4,275
PITI: $3,730
Net rental income: $545
By this calculation, you're ahead. Whether or not an FHA lender will do this calculation or not, I don't know. You may have a hard time getting any lender who will do this loan at all. Four plexes are sort of a no-mans land. While they're theoretically qualify for conventional loans, not many lenders want to do those loans.
Jon, can you explain your went from a NOI of 45k to a coc return of of 8.8%? 8.8 is very specific which makes me think you have a calculation that includes taxes, insurance or some other variable that wasn't explicit in the calculation... if he runs this property the way I run my property he will be laughing all the way to the bank on 25% down 6 percent... do you have a reserve account or other consideration? Thanks- I am new to the forum and trying to understand the nomenclature.