What do you think of this deal?

Okay so I need to get your feedback on this deal. I am pretty sure it’s solid, but can’t tell for certain.

fourplex, north austin area (but south of 183)
purchase price: $180,000
10% down 7.5% 15 yr note, no pmi
rents at peak: $2400, tenants speak spanish only, not the most reliable
1300 a year insurance, so assume 110 a mo. for insurance
3400 annual taxes
approximate piti: $1800

yay or nay?

And - a followup question. If any of you RE agents or birddogs know of deals that cash flow better than this one, but are still relatively central austin, feel free to email me.

I see no reason to get involved with this one and I’ll explain my view in a bit.

What are the comps?
What sort of deferred maintenance is there?
How are the utilities handled?
Who’s going to manage?
etc., etc. - way too many unanswered questions for a fourplex

Okay, so we put 18k plus costs down, say approximately a total of 25k. We’ve got a loan of 162k that runs us about $1,500 per month on a 15 year note.

Your tax number is low and will likely be at least $4,500 (probably closer to $5,000) so that’s another $375.

Your insurance number is low and will likely be at least 50% higher than that, especially if you carry general liability, which you should on a fourplex. For grins, let’s say the insurance is only $150 per month.

Therefore, here’s my breakdown:

1500 PI
375 Ins
150 Tax

For a grand total of $2,025 PITI. So, if we completely ignored vacancies, credit loss (non-payment), repairs, marketing, management, etc., there might be perhaps a 18% maximum cash on cash return. That’s not worth it.

Now, let’s factor in at least 25% for expenses and you’re over $2,500 per month. It’s upside down. I’m a bit conservative, but I think a fourplex should carry itself on a pure rent to payment basis with a 50% vacancy. Granted, those aren’t that easy to find, but I think it’s a decent target.

I had a fourplex a couple of years ago and happily sold it to someone for about the same numbers. My payment was considerably less than $1,500 per month and I didn’t want it. :brow

Anyway, that’s just my view, but my recommendation would be to keep looking. With patience, knowledge, and the right perspective you can do much better if you’re willing to shell out 25k in cash.

Sounds like a deal you got from a realtor or out of the newspaper. I think the market will get worse and who knows how long it will be bad. With just one unit vacant you will need to feed this puppy. I have enough mouths to feed myself. If you could get with 0 down and no personal risk it would just be a ok deal to maybe hold if you can. Lot of trouble for not much reward and the downside %. I used to think that the bad areas were where the cash flow was. I went deep east and found out the hard way that maintenance and collections kill. I am really handy and can fix almost anything and i was every day buying waterheaters, toilets, sinks, appliances, carpet, paint. The labor was free but i could have been getting paid to fix somebody elses problems. I have learned all the hard knocks i can take and have learned to wait for really super deals. If i can help let me know

Thank you,

Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas 78737

512-301-9171 home
512-587-6177 mobile

You’ll quickly learn the meaning of the phrase “burned out landlord” by purchasing properties with those numbers.

How many deals have you looked at in addition to this one?

You may have to look at 100 deals to find a good one. That takes time and effort. If you don’t do your homework you will get burned.

Dude… do you ever return your phone messages?

I left you a message-- had a lead in C.C. for you.

I’ve been outta town. I’ll call you this week.

Talk to you soon,