Triplex: to buy or not to buy?

[John Dillon]

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?