All Forum Posts by: Nelson M.

I am actually going to look at this property this weekend and then decide if I want to make an offer or not, so there is no closing date as of yet. I have spoken to a lender though and he gave me the loan estimates. Now he's waiting for me to call back when I make a decision. He suggested I ask the seller to pay closing costs since I don't want to empty out my cash reserves and I'd have a better chance of getting the loan if I do that.

Yes, there is room to increase rents as they are below market.

What exactly do you mean by homeowner programs? I was told that small local lenders are more convenient to deal with than big banks so I've only been speaking to the local ones and they don't seem to have any programs, at least none that I know about. 

@Justin Fernandez - Yes, at this rate I could break even after 2 years. I have not factored the interest increase because I assumed it would just get canceled out by the removal of PMI, although I know the interest increase will be more costly than PMI but I don't expect it to make much of a difference in cash flow. Would you recommend this deal with a break even point of 2 years?

@Arianne L. - Hi, thanks for your reply. It would indeed be a good idea to factor a management fee but since I would be living at the property I figured I'd never have to go out of my way to manage it so I left it at 0%. And my analysis is showing a 9% cap rate when calculated using NOI, not cash flow. If you don't mind me asking, how much do you usually expect per door? I've heard @Brandon Turner say that he expects at least $100 per door, so using that guideline I thought I was within the ballpark, although I'd love to see closer to $200 per door but that seems to be difficult to accomplish with the current market up here.

Thanks for your reply!

Well honestly I don't feel too comfortable with that monthly negative cash flow figure but the property has been updated (new roof, plumbing, renovations) so there should not be any CapEx or costly repairs needed. It's possible I may not even really 'feel' that negative cashflow coming out. However, I am aware that I may have to take money out of my pocket that first year and I am looking at the $4,440 negative cashflow as if it was part of the down payment financed throughout a year.

The listing information says that tenants pay all utilities but I am still budgeting 15% just in case. 

I feel like this can be a good investment if I can get through the first year without too many issues.. But I guess here is where risk level comes into play. I am usually a risk-welcoming individual, but being my first ever deal I want to be 100% sure of what I'm doing.

Hey everyone,

I wanted to post my analysis of this potential deal to see if I can get some input on it from the veterans in case I'm doing something wrong. This is a triplex I want to move into for about one year to satisfy FHA requirements and then I'd be looking for another triplex or quadplex to repeat the process.

Triplex (1 4BR and 2 2BR)

Asking price: 180k

Rents: 900 + 750 + 750 = 2,400 (Actual would be 1,650 because I'd be living in one unit)

PITI: 1,300

Other expenses breakdown: 

Utilities (15%): 360

Maintenance (10%): 240 

Vacancies (5%): 120

Self-managed (0%): 0

Total: 720

1650 - 1300 - 720 = (370)

I would begin showing a negative cashflow of ($4,440) for the first year, then after moving out, that number would go to:

2,400 - 1300 - 720 = 380 

(potentially more than $380 because the property is in good condition and there isn't really much to repair)

Meaning that after a down payment of $6,300 plus the $4,440 of negative cashflow I will lose the first year, that leaves me at $10,740 all-in. However, the 2nd year I would have a positive cashflow of $4,560 for the year, leaving me at a 42% ROC figure, which seems pretty enticing.

My hesitation to get into this deal stems from having to spend a whole year with negative cashflow, but I understand that sacrifices need to be made in this business, and especially when it comes to owner-occupied units. Would you recommend that I get into this deal? Or should I keep looking for a property that can still cashflow while only occupying one unit?

Thanks for your help! Any advice is appreciated.

Hello all,

REI newbie here. I have been looking at a triplex to owner occupy for around $180k. I've ran the numbers and it looks like a potentially good investment, the only thing holding me back from pulling the trigger is that the down payment plus closing costs would eat most of my cash reserves and I wouldn't feel comfortable jumping into an investment without reserves. While shopping for loans, however, I was told by a couple of lenders that it is possible to get the seller to pay closing costs if the full asking price is offered, which would ease up my worry of being left without reserves.

My question to the BP community is: Is this a valid statement? And if so, what are the chances of the seller accepting these terms? I understand sellers try to get as much money out of a deal as possible so I had not considered asking a seller to pay closing costs. Also, is this something that would get amended into the contract if they do accept?

This would be my first deal and as you can see, I am a bit apprehensive, but the thought of being stuck in analysis paralysis is an even scarier one. I want to take the plunge soon.

Any advice is appreciated! 

I was pre-approved in NJ for an FHA loan to purchase a 4-plex. Sounds like this particular loan officer is giving you erroneous information.

I was pre-approved in NJ for an FHA loan to purchase a 4-plex. Sounds like this particular loan officer is giving you erroneous information.

Thanks for this! I was planning on getting my PA license soon because I'm looking to purchase properties there next month and the licensing course can be done online but I had no idea that credit hours could transfer over from NJ to PA. Now I'm thinking that I should probably get the NJ license first but the issue would be that I can't do a M-F 8 hour class due to my work schedule so the process might get a bit lengthy if I go for both at once. 

Very helpful post! Thank you once again. 

Those rehab figures were very helpful. Thank you!

And congratulations on a job well done. 

Thank you all for the links and insight!

@Account Closed

I understand the risks involved with the quality of tenants in these areas. However, I am researching every property through neighborhoodscout and other sources of information to get a feel of what the neighborhood feels like. If the vacancy rate is higher than 15/20%, it means it's one of those boarded up blocks, and thus I tend to look the other way. As far as managing, I am factoring in the cost of PM when doing my numbers, I just hope I'm able to find reliable PMs. Worst case scenario, I'm sticking to a max radius of 3-5 hours away from my area. That way I can be able to make the drive for whatever reason, as I am not adverse to the idea of investing a little sweat equity into my properties. 

"How will this affect your life?"

- I feel this will be a good starting point for me as well as a learning experience, not to mention the additional income. I do plan to invest in nicer properties in the near future when I have the financial resources, but one must start somewhere, right?