All Forum Posts by: Jacob Breazile

Thank you very much @Costin I. I'll go through my numbers a few more times just to make sure, but I sincerely appreciate the reminders!

@Account Closed Thank you for the detailed post. I have been absolutely humbled by the amount of genuine, detailed replies I have received from everyone, like you. Your points hit home. You have given me a lot of really good information to consider. The unit is beautiful, but ultimately I wouldn't want to live in it for several years. 

Since we are looking to move out of an apartment ( sick to my stomach of throwing away money every month), investing in a different market is out of the question right this second. Most likely, my following purchases will be out of market unless I wind up with an incredible deal here. After all the comments here and a bit of deeper digging I'm starting to realize that after we fine a place to live, investing in a different market really is not all that out of reach.  

Your post has really helped me decide that I'm either going to have to deal with less cash flow, or invest elsewhere. That's just what I'll do. I'll follow up with this post if I do end up closing on this one. 

@Sen A. It's great to hear from someone in the area! Yeah, taxes here are crazy. Speaking of which, I joshed my taxes in the original post - I pasted in from the wrong property taxes, so It's actually 3500, instead of 4600 in taxes (that was a nice surprise), so original numbers are a bit better. I did include PMI and refinancing fees. Utilities are separated.
I ran the report again, accounting for us paying for WSG and 10% management fees just in case (I don't plan on moving out of the city any time soon), and the numbers are definitely worse. Cash on cash is at 18% and cash flow is $206.60 instead of $392.

@Dennis M. Thanks for the valuable feedback!

@Jeff Kehl thank you for your input. Much appreciated! That is what I was thinking, but I wasn't sure if that was even an appropriate way of thinking about it. Good to see hear about someone else in a similar shoe.

@Chace Fraser I look forward to it! 

@Dennis M. Strong point. It's like a battle of thoughts. On one hand, the property is in new condition, in a great location, and has good cash-on-cash. On the other hand, you're absolutely right. This isn't a house hack, and I would essentially be paying for a property that doesn't need renovation. As a result, I'd be paying nearly "retail" (of course I intend to get a better deal then list price). Thank you for the observation and your feedback. I really appreciate it. 
One thing I did seem to notice that I'd like to point out, is that the properties I did look at for renovating had significantly higher CapEx, not to mention renovation costs, that made it more costly than simply a property that needed no-to-less work.

I'll see how much I can talk to the seller down and go from there. This feedback has been awesome.

@Chace Fraser you just about nailed it. Rent would be $1100, which is less than we are paying in a small apartment now (if you can believe that!), and $1100 is after estimating things such as CapEx and other expenses. So it's affordable in this case. Almost at the 1%. The conservative estimate was .89%, which isn't ideal, but it's close. I think with less conservative estimates it would be closer to 1%.

I would love to attend! Sadly, I have obligations tomorrow. The support of this community has been incredible and especially informative so I'm looking forward to meeting many of you in person. 

@Jeff Brower Thank you for the input! Good to hear I'm not completely off the ball. Congratulations on your purchase! That looks great! I'm looking forward to being able to spend time and money on house hacking down the road. 
Good news! I thought FHA out in OR required 2 years, but one is even better!

Happy Wednesday everyone! I've just finished going through the prequalification process and am getting ready to purchase my first MFH. I have spent a lot of time reading through guides like Brandon Turner's How to Estimate Future CapEx Expenses on a Rental Property and How to Buy a Small MultiFamily Property: A Step by Step Case Study, which have been incredibly helpful.

I have found a property that I'm very interested in, but I would like a second opinion before moving forward. I live in the Salem, OR area where the market has been really competitive. I know many investors want to see the 2% rule, but in this area, I'm not sure that is reasonable unless my first property was one in desperate need of rehab. The following home is in an awesome location, built in 2015, and is not in need of any repair (it's basically new condition, so I left the "after repair value" the same as the purchase price). My goal is to live-in one side, then after the two-three year period for FHA, move out and continue to generate cash flow. The estimate below is as-if both sides are rented and W/S/G is paid by the tenants. CapEx is included, but is considerably lower because it's a very new, excellent condition property (I considered things such as paint, appliances, flooring that would be needed while we still own the property).

Purchase Price $350,000

Purchase Closing Costs $1,300

Total Project Cost $351,300

ARV $350,000

Down Payment $12,250

Loan Amount $337,750

Amortized for 30 years

Loan Interest Rate 4.6%

Monthly P&I $1,731.46

Total Cash Needed $13,550.00

2% Rule 0.85%

Initial Equity $12,250

Monthly Income ($1500 per unit) $3,000 

Monthly Expenses (Including CapEx) $2,607

Monthly Cashflow $392 

Pro Forma Cap 7.28% 

Total Cash Needed $13,550.00

Cash on Cash ROI 34.73% 

Purchase Cap Rate 7.28%

Est Vacancy $150

PMI $200

Est CapEx $63

Insurance $80

P&I $1,731.46

My only major concern is that I'm not meeting the 2% rule (and just short of 1%, even), but this is probably the closest property I've seen, and has a significant cash on cash ROI. Any advice? Is my thinking reasonable in a competitive market?

@Kay March thank you for your insightful post. Posts like yours make me very thankful I asked in the first place. It wouldn't have crossed my mind to be on the lookout for inspectors that essentially "sell" their buddies services. 

It sounds like a typical inspector is fine, but it's important to be with them every step of the way and don't be afraid to get a second opinion from an expert in the field (plumber/electrician/etc). I'll remember this!

@Matt K I didn't even know some piping would be made of clay or cast iron. Holy cow. Thank you for the info! A sewer scope and qualified plumber is on my list!

Thanks @Anthony Wick. I'll definitely do that.