First Deal - Triplex------thoughts?

6 Replies

We are just starting out with real estate investing. Here's our potential first deal we would Love to hear feedback:

Property Appraised 190k

Asking price 130k

Triplex with combined rent of $1450/month (currently rented, could raise slightly if needed)

Financing:

Loan for property

Down payment HELOC from our home

Our goal is to get started in multi family units in order to grow a portfolio and use equity from rentals to purchase more.

Thoughts? Feedback?

Words of encouragement to calm newbies first deal jitters?

Need more details. How much down? Property taxes? Insurance. What age and condition is kitchen, bathrooms, water heaters, furnace, roof? What is the potential to increase rent? How easy are they to rent?

I am guessing that you said the total rents for the 3 units is $1350, or $450 per unit. For myself, it depends on the size sq ft of the units, how many bedrooms and what condition.

The problem with low rents is; when a tenant moves out it can cost you 1 to 3 years of your profit just to clean an apartment and make a few small improvements. I stay away from really low rents unless you can increase the rents to no less than $850 within a few years.

You cannot figure out whether or not to buy the property without doing some serious math to see what the property can do for you within 2 years. If you can purchase the property for $130k and it is REALLY worth $190k the day you close escrow then you are making some seriously good profit the day you close escrow. But, it you have to spend $60k to make repairs to dump the property then I would not buy this property because of the low rents. At least, not without seeing all the numbers. The best business model is to buy properties when you can double your investment capital, or earn 50% ro 100% on your money every 1 to 2 years. 

The thing to watch out for is the ROI should be 50% to 100% within the first 1 to 2 years, but as the years go by the ROI depletes to an average of 8% to 14% and if you are not getting good cash flow it is time to dump the property to find one that gives you 50% to 100% within the 1st 2 years.

@Jack Orthman

20% down payment or 26k

The house was appraised at 190k in 2018.

Other than cosmetics, no repairs needed.

Units include

1 1 bedroom

2 2 bedroom

House is older, but in excellent shape.

Rent in this market is not above 600/month, at $850 we would experience vacancy I presume.

I ran the numbers with guestimates. I would probably purchase this property only because you are saying the property is worth $60k more than you are paying. The property definitely fits into my business model where you can earn 50% to 100% on your money within 1 to 2 years. But, since the property is old I plugged in 15% for repairs and that leaves you with a cash flow for $76 per month, but the big money is not made from cash flow. My numbers are assuming you can insure a triplex for only $700 per year and the property tax is only $1200 per year and I doubt it will be that low. This sounds like a good property to flip, but you had better be right about the re-sale value. If you have any doubt then don't take the risk. Buy the property, dump it and use the $45,000 you earn to purchase something with more cash flow.


I have to post the images in 2 posts.