Tri-Plex Deal or No Deal

Buying & Selling Real Estate
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Tri-Plex Deal or No Deal

Caleb Godsey
Austin, TX · Member since 2018 · 24 posts · 4 votes

Hello BP Community!

I'm just getting started in reel estate. Been ramping up on education & learning as much as I can over the past 4-5 months. I'm starting to settle in on a specific property and this one came across my lap today. I understand everyone has different opinions and there are lots of variables in real estate, but I'm trying to familiarize myself with what a good deal looks like. 

Here's the numbers, curious everyones thoughts on if they would/wouldn't take the deal and why/why not.

Tri-Plex

Listed for $130,000, verbal offer that they would accept at $110,000

Rental Income

Unit A: $650

Unit B: $650

Unit C: $650

Total All Units: $1950

Expenses

Mortgage: $500/mo (20% downpayment, conventional 30-year fixed loan @ 5.5%)

Property Management: $195/mo

Vacancy (8%): $156/mo

Property Tax: $150/mo

Maintenance: $90/mo

Utilities: $500/mo

Insurance: $90/mo

So by my estimation, it's cash flowing for about $270/month. Realtor says the rent is kinda low and could charge about $700 per unit, but I'm trying to be conservative with the numbers. What are your thoughts on this and what realistic things could make this a better deal?

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Jared Skov
Rental Property Investor · Lanai City, HI · Member since 2018 · 64 posts · 70 votes
7y

Run the numbers on a 15yr loan with 25% down and increased rental rates, you'll get a lower interest rate and increase your chances of FI/RE at a younger age. 

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  • Joshua Schoer
    Accountant · Jacksonville, FL · Member since 2016 · 52 posts · 24 votes
    7y
    @Caleb Godsey Hi Caleb, sorry don't know the price to do this but worth investigating. I remember researching it in NC for a deal and I think the utility company charged about $1k per meter but could be wrong. Either way look at your rent vs the market rent. If you feel what the current owner is charging excluding utilities is comparable, keep in mind most places don't include utilities, so you might have the ability to charge back some without losing tenants. Look at the current leases, if they are already on month to month might be easier to start this. Either way, let us know how it goes. Good luck!
    1Reply
  • Caleb Godsey
    OP
    Austin, TX · Member since 2018 · 24 posts · 4 votes
    7y

    Hi @Bjorn Ahlblad! Could you explain a rent roll to me? Asking for all the financials and leases from my realtor so hopefully I'll see all those this week to know more history about this property. Anything specifically I should be looking for in these docs? Thanks for the tips!

    0Reply
  • Caleb Godsey
    OP
    Austin, TX · Member since 2018 · 24 posts · 4 votes
    7y

    @Raul Cesar cortes

    I don't believe the units have backyards. It's not in the Austin area but in a decent sized city within a 100 mi radius of Austin. I don't know that I could manage the property on my own. This would be a long distance purchase from where I live.

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  • Caleb Godsey
    OP
    Austin, TX · Member since 2018 · 24 posts · 4 votes
    7y
    Originally posted by @Joshua Schoer:
    @Caleb Godsey

    Hi Caleb, sorry don't know the price to do this but worth investigating. I remember researching it in NC for a deal and I think the utility company charged about $1k per meter but could be wrong. Either way look at your rent vs the market rent. If you feel what the current owner is charging excluding utilities is comparable, keep in mind most places don't include utilities, so you might have the ability to charge back some without losing tenants. Look at the current leases, if they are already on month to month might be easier to start this.

    Either way, let us know how it goes. Good luck!

    Thanks for the help Joshua! I appreciate it. Definitely going to explore my options because that's the one bothersome thing with this property – the utilities. If they were covered by tenants, it would be a done deal. I'm checking comparable properties in the area and most seem to be renting for $850-900. So the $650 tenants are currently paying for may be significantly under valued. 

    I'll keep you posted if I purchase the deal, get financials, etc. to let you know what I did and how things go.  

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  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    7y
    Originally posted by @Caleb Godsey:

    Hi @Bjorn Ahlblad! Could you explain a rent roll to me? Asking for all the financials and leases from my realtor so hopefully I'll see all those this week to know more history about this property. Anything specifically I should be looking for in these docs? Thanks for the tips!

     Caleb, a rent roll is a document that captures the snapshot of the income produced by the property. That is really what your asset is worth-its ability to produce that income. It will include name, unit, start and end date of the lease and rental obligation. All the best!

    0Reply
  • Javier D.
    Investor · FL · Member since 2017 · 266 posts · 220 votes
    7y
    @Caleb Godsey Not to go off topic but why a 15 year mortgage and not a 30 year so it cash flows more? He can always throw extra at principal only.
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