Would you do this Triplex Deal?
About me: I am a new to Real Estate Investing, began learning 2 months ago, and have decided to jump in. First and loudest message I have heard is that it was important to act and start making offers and that will accelerate Learning. My third offer was accepted after some negotiation, and of course now I am scared I am going to buy this property and not get the cash flow I think it will do and lose my $30,000 I have saved for this.
The property: Foreclosure, purchase price is $74,000, 2014 taxes $3897, $1,750/mo historical rent (anecdotal from agent who did cash for keys at foreclosure)
I believe it needs $5-8,000 in preparation and repairs to be move-in ready
Unit 1: 1 bed/bath, ready to rent, maybe 1 hour of cleaning needed, told it was getting $450/mo before foreclosure.
Unit 2: 3 Bed 1 Bath, Some "Honey do" type repairs needed and painting, should have no problem completing it myself in 1 week. told it was getting $750/mo before foreclosure
Unit 3: 2 Bed 1 bath, needs all new flooring, some mold cleanup in bath and would benefit dramatically from counter replacement in kitchen, told it was renting for $550/mo before foreclosure
The Market: 5% Pop growth, 7.8% vacancy
Room to grow rents from historical: here is the fair market for rentals:
One Bedroom $562
Two Bedroom $737
Three Bedroom $994
Am I doing a good deal in your opinion?
@Ken Collins I haven't run your numbers but focused on the language in your post. You said 3 times "told it was getting XX" for rent. Don't rely what someone "told" you. If your working w/ an agent he should be able to provide you w/ rental comparables. You can also pull your own rental comparables using Rentometer. There are probably some other tools out there for you to verify rents.
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Real Estate Agent Illinois (#475. 112189)
- 3126817487
- https://www.chicagodiscountproperties.com/
Hi Ken,
Welcome to BP!
Looks pretty good so far, how much is insurance on this house? What about utilities- are they split or would you be paying them? If you are paying, how much are you expecting for that?
Once you own the place, get the units ready as quickly as possible, focusing on the ones that need less work and get them rented and keep working.
Kelly
Thank you! I like Rentometer, Nice tool. I like that it provided me with the details of Comps nearby. It looks like the rents I was told are a bit low for the area, which matches what I listed in my post to be the fair market rents from ObBoard.
This actually looks like a pretty good deal. Here's my analysis using the pro-forma numbers you were given by the agent.
| Purchase Price: | $66,600.00 |
| 25% Down Payment: | $16,650.00 |
| APR: | 5% |
| Revenues | |
| Rental Income: | $21,000.00 |
| 10% Vacancy: | -$2,100.00 |
| Gross Income: | $18,900.00 |
| Expenses | |
| Property Taxes: | -$3,897.00 |
| Insurance: | -$500.00 |
| 10% Maintenance & Repairs: | -$2,100.00 |
| 10% Capital Expenditure: | -$2,100.00 |
| 10% Property Mgmt: | -$2,100.00 |
| Total Expenses: | -$10,697.00 |
| NOI: | $8,203.00 |
| Mortgage (P&I only): | $3,217.71 |
| Cashflow: | $4,985.29 |
| Cash on Cash Return: | 17.82% |
| Cashflow per door per month: | $138 |
Oops... let's try that again...
Purchase Price: $66,600.00
25% Down Payment: $16,650.00
APR: 5%
Revenues
Rental Income: $21,000.00
10% Vacancy: -$2,100.00
Gross Income: $18,900.00
Expenses
Property Taxes: -$3,897.00
Insurance: -$500.00
10% Maintenance & Repairs: -$2,100.00
10% Capital Expenditure: -$2,100.00
10% Property Mgmt: -$2,100.00
Total Expenses: -$10,697.00
NOI: $8,203.00
Mortgage (P&I only): $3,217.71
Cashflow: $4,985.29
Cash on Cash Return: 17.82%
Cashflow per door per month: $138
Now here's my analysis using your market rate rent assumptions.... a very good deal IMO.
BTW the $500 insurance is a total guess on my part.
Asking Price: $74,000.00
Purchase Price: $66,600.00
25% Down Payment: $16,650.00
APR: 5%
Revenues
Rental Income: $27,516.00
10% Vacancy: -$2,751.60
Gross Income: $24,764.40
Expenses
Property Taxes: -$3,897.00
Insurance: -$500.00
10% Maintenance & Repairs: -$2,751.60
10% Capital Expenditure: -$2,751.60
10% Property Mgmt: -$2,751.60
Total Expenses: -$12,651.80
NOI: $12,112.60
Mortgage (P&I only): $3,217.71
Cashflow: $8,894.89
Cash on Cash Return: 31.79%
Cashflow per door per month: $247
again.. i'm assuming the triplex has tenant paid utilities.
@Ken Collins Thx for the OnBoard reference. We're going to add it to our list to use for our own due diligence.
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Real Estate Agent Illinois (#475. 112189)
- 3126817487
- https://www.chicagodiscountproperties.com/
$500 for insurance? Sign me up!...better look into this one, but it could be accurate. Regardless, it sounds like a slam dunk. Congrats.