Long time MMM reader, saver, investor.
New to Real Estate investing. Looking to purchase a rental in CA where i live and work.
5 plex- 10beds 5 baths- 5 units all, 2bed 1 bath. In a high rental, working class, poor neighborhood.
Asking price 379,000 ...been on the market for over 100 days. Price probably negotiable? Im thinking 325,000-350,000 range
Rent $3650 3 units 700x3= 2100 2 units 775x2=1550
I did two versions of buying this property. One at the asking price 379,000 and one at 350,000
Version A -379,000
Mortgage 30yr fixed 4 % - 1448
property taxes- 479
Insurance- 100
Total 2027
2027- 3650= 1623 monthly income 1623 divided by 2=811 (50 percent rule) 811x12months= 9,732$
9732 divided by 75,000 down payment = 12.9 cash on cash return
I know at 379,000 it falls slightly under the 1 percent rule= 3,790
Actual rent 3650
Version B 350,000
Mortgage 30yr fixed 4 percent 1337
property tax 479
Insurance 100
Total 1916
1916- 3650= 1734 monthly income 1734 divided by 2= 867 (50 percent rule)
867x12= 10,404$
10,404 divided by 70,000 down payment = 14.8 percent cash on cash return
(1 percent rule) 350,000= 3500
Actual rent income= 3650 meets 1 percent rule.
Seems like this property has potential. Am I missing something or is my math off?