Triplex: to buy or not to buy?
Hey everybody! I'm new to BP and wanted your input on a property.
- Built in 1904
- Triplex with two 3BD /1BA units and one 3BD /1.5BA
- Currently leasing at $600, $700 & $800 mo with long term tenants
- Landlord pays trash/water; all other utilities in tenants' names
Financials
- Under contract for $102,500
- Approx $40K in deferred maintenance & updates.
- 3 x HVAC systems replaced @ $5K each = $15K (does not need to be done immediately, units could be serviced in the meantime and replaced in a few years)
- Reno of All Unit Interiors @ $3K/unit x 3 = $9K
- New windows and doors: $300 x 30 = $9K
- Exterior minor lead abatement, gutter replacement, porch and pier repair: $4K
- Contingency = $2K
- After improvements, market rents of $850/mo.
- Gross Income : $30,600
- NOI (50% rule): $15,300
- ARV: ~$130K
- Cap Rate : 11.76%
Other
- The unit is in a good area of town.
- All tenants are month-to-month. I would ask two to vacate. Only one tenant has a written lease with a security deposit. Current owners will provide a letter describing the lease situation for the tenants with the verbal lease.
- This would be my first purchase.
The prospect of vacating two tenants and all of the work is a bit intimidating! What would you do?