Hey all,
I've found a Fourplex that seems to be in great shape, but I'd love your help estimating cash flow to make sure I understand what I'm getting myself into.
The building was built in the early 1980's. It seems like a fourplex surrounded by other (almost identical fourplexes) selling for about 50-60k more. It's not under contract yet. I'd get an inspector to come and check it out head to toe. It's in a pretty decent school area, lots of working class folk. There are a good mix of homes and apartments in the area, mall nearby, park nearby, etc etc. All the units are 2 bed/2 bath and currently occupied.
I'm going to use sort of worst possible numbers and see if this still makes sense.
The property is being sold for 155k. Let's assume I get it for that price. (I'll try to negotiate for the buyer to cover closing costs, which I estimate to be about 4k. I'd be happy to pay 'sticker price' in that case, but we'll see when it comes to negotiations.)
FHA financing for 155k = $5,250 down, I'm going to assume a 7% rate because why not! Taxes were about 4.5k last year. Let's assume an increase and put 5k.
Checking out rents, I'm pretty sure I could get $950 a mo. and be very competitive in the area. But again, let's be conservative, and put $850. Average median income for the area is about 50,000.
Revenue
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$850 mo x 4 units (but I'll be living in one) x 80% (vacancies, etc) = $2720
Expenses
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Mortgage payment ~ 1700 monthly @ 7% (assuming 5,000 annual taxes, 3,000 annually for insurance)
There is a $700 monthly maintenance fee, which covers the exterior part of the building, the grounds, and access gates.
500$ a mo. for repairs, future repairs, any other expenses.
= $2900
Again, this is an incredibly conservative estimate, and I still come pretty close to breaking even and *almost* living for free.
Tear apart my numbers! What are your thoughts?
