Newbie needs insight!

I have found a 4-plex that I can cash flow at about $82 a month with keeping the current rents at what they are. I also figured everything high when I crunched the numbers. Now with fix up I believe that I can raise rents $100 per unit netting at least approx. $482 per month (probably more though). I was also thinking that if I do purchase this property I will raise the rent by $25 per unit netting me a total of $182 per month cash flow right now!

The thing is I’m just starting out and this will be my first property. Does this seem like a good idea? I mean it’s not alot of money right now but I plan on holding on to it for the long haul. I am going to make an appointment to see the inside of the property sometime this week. So its not a definate purchase yet either. The outside of the property looks sound from what I have seen and if I like what I see inside I will be taking an inspector with me the next time I go.

Just to let everyone know I will be keeping my normal job so I will still be able to cover some expenses if one of the units are not rented year round.

Any thoughts to put my mind at ease would be highly appreciated!

Thanks,
Jon

This would not be a deal for me. I use a set of rules to determine if a property is a deal or not.

  1. I won’t even look at a property unless the gross rent is at least 1% of the purchase price (1 1/2% to 2% is better).

  2. I MUST have a positive cash flow of AT LEAST $100 per unit (absolute miniumum). So in this case, I would need AT LEAST $400 per month positive cash flow (after ALL expenses)

  3. The positive cash flow must be at least 1/3 of the mortgage payment. (1/2 is much better)

  4. I never pay more than 70% of the market value for a property. This is your insurance if things go wrong.

I would recommend buying a few single family houses before trying a multi unit. Tenants in multis are generally more labor intensive and more trouble. Also, it is much more difficult to sell multis that SFHs, so single family houses are less risky.

Good Luck,

Mike

Neotracer – what city is the property located?

Sometimes that changes everything about the types of replies you will receive.

Good luck to you!