My first investment property, please help me decide

Rehabbing, Fix and Flip, Rental Properties
1

Hey everyone, I’m about to purchase my first investment property. PLEASE help me analyzed this deal and make a final decision. I have to decide within the next few days. THANKS in advance.
It’s a 4-family property and I plan to do a owner-occupied FHA loan on this:

Expenses:
Purchase price - $475k
5% down FHA - $23,750
Mortgage amount $451,250 @ 6% = $2,706/month + $200PMI = $2,906/month

Taxes - $12k/year
Insurance - $2k/year
Water - $2k/year
Heat - $5k/year
Vacancy/Misc - $5k/year
Total = $26k/year or $2,167/month

Total expenses = $5,073/month

Income:
Rents 4 units, $1400/each = $5,600/month

$5,600 - $5,073 = $527/month minimum cash flow, in an over-expensed approximate scenario. I expect it to be as high as $1,000/month once things are settled and there’s no $5k/year on misc charges. There are also 3 garages with potential income of about $250/month total.

What do you all think of this deal? Should I take it??

2
THANKS in advance. It's a 4-family property and I plan to do a owner-occupied FHA loan on this:

Are you planning on living in one of the units? If so you will not be able to use the rents for all four units as you listed.

3

The numbers I ran tells me this is not a good deal but ask Propertymamager

4

Oops, forgot to clear that up. I’m doing FHA for the generous loan terms. There’s a separate room there with an additional bathroom that I’ll “live” in. But, no I won’t be living in any of the units so I will be collecting $1400/unit.

5

this deal looks marginal and your starting your investment career off on the wrong foot (IMHO) with some less than “above board” behavior. The paper trail that will be generated that shows you are not actually living there will be pretty enormous.

6

Aren’t HUD loans for 1-4 unit properties?

Keith

7

NJBird_dog,

Aside from the legal implications mentioned by the others, here is how I see this deal:

Gross Rents: $5,600 per month
Operating Expenses: $2,800 per month
NOI: $2,800 per month

Mortgage: ($475K, 30 yr, 6%): $2,847 + $200 PMI = $3,047

Monthly LOSS: $247

Not a good deal.

Good Luck,

Mike

8

Terrible deal. Don’t pay retail. Period!

9

Terrible deal. Run the other way. You want to buy a property where you make money not lose it.