Hello, my name is Tinah. I am brand new in real estate investing and I need some guidance over a property that I am analyzing. It's a three-family that according to my real estate agent will sell at 515k to 520K. It would need work of around 35K to update the bathrooms, boiler and water heater over the next couple of years. ARV is about 575K. The current tenants are all TAW at below average rent.
My analysis seems to say that it's not a good deal (sale price is over 70% of ARV), although if I play around with numbers it can work if I get good interest rates and increase the rent to competitive rates( 100/unit and 8% ROI). What scares me is the possibility of having to deal with eviction in addition to the repairs. There seems to be more downside for a prospective buyer in this case at the market price?
Is there a way of factoring in eviction to a property analysis?
There are a few strategies you're kind of eluding in here. ARV really indicates more that you're thinking of a flip. In that case, the numbers are definitely way too tight. Once you factor in transaction costs you'll be in the red. And that's assuming the reno is actually $35k, which it may well go over.
Talking about rents it sounds like more of a cash flow play then selling it to another investor, which is great too. But transaction costs are still a factor. Remember to factor in closing costs and realtor commissions.
Thank you Taylor, appreciate it!
Eviction means you are counting 3-6 months of rent that you would be missing out on potentially along with another 3-4% of the rent for repairs. You should always put a number to your problem. It will make life easier. Good luck!
Thank you for that tip, Aj! Will note it down, appreciate it.