Hi ladies and gentlemen. Would like advice on a deal evaluation. My first offer on a triplex. Private financing from a somewhat experienced investor who has done a couple flips and a couple rentals. I am bringing deal and sweat equity for 40% of our first deal together.
Legal triplex 816 sq ft. I know it seems small. 2 studies and a 1/1. County tax assessor says 1068 adj sq ft.
Offer price: 240k
Repairs needed minimal. Partially rehabbed already. One unit still needs work. About 15k to bring to good condition(nothing elaborate as market wouldn’t support)
ARV: around 280
25% down plus 15k repairs= 75k out of pocket cost
unit 1(studio) $795/mo
Unit 2(1/1) $850/mo
Unit 3(studio)- assume also $795/mo
Total rent after stabilization: $2,440/mo
Maint: 5% $122
Capex 5% $122
Vacancy 10% $244
Property management myself, as I am the sweat equity partner with none of my own money in
Net income 2440
Monthly expenses 1887
Cash flow: 553
COC RETURN on 75k: 8.8%
Brrrr method: 75% refinance conservatively instead of 80%: 210k back from 180k loan. 30k in cash back in investor pocket. Instead of 75k out of pocket, 45k out of pocket after refinance.
New principal and interest: 885/month
New cash flow, down to $427/month
New COC RETURN on 45k left in the deal: 11.8%
Anything I’m missing?
Yes, you are doing the property mgmt yourself now. But perhaps enter it in the deal as in the future you may not want to do it yourself. Also not sure where you are located but i do not see money set aside for lawn care/snow removal. In your market, who caries utilities/trash etc. ? May want to add that to your pro forma!
In Florida so it would be lawn care, no snow. Doesn’t that come out of the maintenance withholding?
Also. If I’m the sweat equity partner, shouldn’t I present this this to my partner without the management fees? I figure if down the line I have so many properties that I want to hire a property management team, it would come out of my half of the profits…. Not my partners. Thoughts?
Looks solid. Vacancy I always say 5% in our market since rental market is so hot. Have tenants pay utilities. What neighborhood grading would you give it?
B- neighborhood. Yeah I’m trying to keep conservative. I figure if each unit is open for 1 month out of 12, that’s 8.3% vacancy. I would hope it doesn’t take me a month to rent out, but I’d rather plan for more, than less. Especially since this would be my first