My First Rental - 3Plex

1 Reply

Hi everyone,

I have been in analysis paralysis up until I found this deal. I am making an offer today, I just want to make sure it seems like a great deal to y’all too.

Type: 3Plex;

Market: Midwest;

Purchase price: $130K;

5% Down payment: $6.5K;

Interest rate: 4%;

Closing costs: $500

The first unit is a 2BR, 1Bath and has all new appliances and comes furnished. Rent - $800/month

The second unit is currently 1BR, 1 Bath but a second BR can be added to oversized living room. It has older, but nice and clean, appliances. Rent - $650/month

The third unit is the smallest and needs work. I will live in this unit and perform light renovation. Once I fulfill requirements of loan, I will move out and rent for $550/month

Total rent: $2K/month

Based on the average tax and insurance information in the area, the total for mortgage, taxes and insurance should be $1K-$1,050/month. After considering 10% for maintenance and repairs, and 10% for vacancy, I should cash flow $500-600.

I would appreciate any feedback regarding my estimates and assumptions, but also about my plan once I purchase the house. The 5% conventional loan means I should live in the house for a year, but I am curious if a new job out of state would be a valid exception to move out early and rent out the third unit. I am planning to quit my current job at the end of Jan and go abroad for two months. Once I return, I would live in this 3Plex until I can renovate it and find a new job out of state.

Thanks for reading!

First of all congrats on breaking up the analysis paralysis! I know that can be hard to do. Few points:

Use the calculator on this site and share it. It's easier to follow.

Hopefully you are calculating mortgage insurance with your 5% down. 

10% for maintenance and repairs isn't going to cut it

What about property management and other expenses?

Can you find a way to put a little sweat equity into the units to increase the rents like the $800 one?

If this is in a bad area, you may want to budget for extra repairs, evictions, etc