Hello everyone, so after checking out David Greene's Multi Familiar webinar I went ahead and used the BP Rental Property calculator for a Triplex I saw on Zillow that fits in my budget just to practice. Below you can see the results and the numbers I plugged in.
So a few questions here, my first being, do my numbers seem at all accurate? For rent I went to Rentometer.com to get an estimate on rent. The average is $1500 and after checking out some of the other properties I think this can be rented for $1500 after its fixed up. I only put 10k for repair costs but that is just merely a guess. I don't know how to make that number more accurate since I have zero experience. I put 5% for Vacancy, CapEx, repairs/maintenance, and I put 8% for management fees. Again just sort of guessing here.
My second question is, what would you do next ?
My 3rd, is how much time does it usually take to fix up a place of this size? Again I did this to practice, but if I was seriously considering this property how do I find contractors to do the work and how do I make sure its getting done correctly and in a timely manner?
Lets say it took 2 months to get this place fixed and then another month to get this place rented. How much would I have to set aside ahead of time for those 3 months?
Thanks for your help!
1) Your numbers seem decent. Insurance looks low, 5% for vacancy, Capex & repairs & maintenance? I would put 1.5% to vacancy, 5% to repairs & Maintenance and Capex... well I'd budget $1000/year personally.
As for your repair costs, depends on what you are doing. Cleanup, door knob changeouts, floor updating, new appliances etc you'd probably be looking around $2500-$5000 depending on the materials you pick out. If you are looking at Renos like redoing the kitchen, changing out windows, changing structural layout ie new walls then yeah you'd be looking between $10,000 - $20,000 most likely.
2) Next I would double, triple check that the house can pull the rents. Drive by it, where is the nearest school? Hospital? Highway access? Convenience store? Bus stop? Is there parking space? Are the neighbouring properties decent? Nice looking? If everything checks out and my gut feels good I would put in an offer on the property!
3) Time to "fix" depends again. Replacing floors? Painting? Structural changes? Yeah could be anywhere from couple weeks to 2 months. Finding contractors is majority of the battle my friend! Good price, good quality, good relationship and good timing are tough to find. Get 3 quotes from various contractors, meet them on site, give them all the same scope of work, ask them their opinions and what they would do if it were their own property etc. Some might be rude/short, some might be over the top helpful, sometimes you have to take chances. To make sure work is being completed timely and correctly youtube how to do it and make sure their workmanship matches. If you have questions ask it here. Things like Flooring installation pattern may seem minor but having joints that match up every other board is very poor installation and can have a devastating effect on the look of brand new floors.
In terms of setting aside money... you have to account for your mortgage, operating costs each month, and of course the Renos! Payments for construction materials and/or sub trades.
Hope that helps...
Best of luck
At zero experience, I would buy one that is already rented first. Maybe not a perfect turnkey expensive property, but one that is working. For example, I bought a small 4 plex one time, with all units rented. 4 one bedroom units. Brick veneer building. The exterior trim needed painting and really a new roof. That was about 8 years ago, and it still rents well, it still needs the exterior trim painted, and still needs a roof. Will pay off in 2 years. One of my favorite rental properties