Deal analysis for my first offer.

5 Replies

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

Current rent:

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

Taxes 440

Insurance 200

Principal/interest: 759

PITI: $1399

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?

Go/no go?

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! 

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