Tri-plex/ Not sure how to use my money options

[Matt Friesz]

Hi BP world, 

I went and looked at a Tri-plex yesterday. Two units are currently rented, we met the tenants, and they let us in to look at the units, which are in good shape. The other (vacant) unit will have to be rehabbed at a cost of $6k, and the exterior needs about $3k of work. Roof is newer (est 2019) no permits found as of yet. I know that it's in a flood zone (AE). 

List is $239k. Cash only.  Current rents are at $1000 for the front downstairs unit, and $800 for the upstairs unit, potential $800 for back bottom unit.

I'm thinking of offering $225k being that it needs some work, flood zone etc...

I have a pre-approval from a hard money lender for $200k, $100k Heloc, and $90k cash. How can I structure this deal to work out with the money options that I have. I want to keep as much as I can or recoup as much as I can, so that I can get into my next one.

[Kevin Romines]

Nice project, let me help you with the numbers. 

You have a $200K approval from hard money, a $100K HELOC and $90K cash. You will only need your hard money approval and your HELOC for this. You wont need your cash. You use $39K for the remainder of the down required along with the hard money. You will typically pay 4-5 % or points for hard money closing costs, so another $8-$10,000.00 in purchase closing costs, and you tell us the rehab is projected at another $9000.00 so in total, you will use $56-$58,0000.00 from your HELOC to complete the deal.

When the rehab is done, you will then refinance into a Fannie Mae or Freddie Mac loan at up to 75% no cash out, meaning no more than $2000.00 cash in hand. The rest goes to pay off the mortgages. However with such a small rehab, I'm guessing you wont be increasing value that much over the amount you bought it for, so I estimate a new value of $250,000.00 X 75% = $187,000.00 as your max. loan amount. This will leave $68,500 to $70,500 on your HELOC. Basically your skin in the game. I estimate your mortgage payment to be approx. $1295.00 with taxes and insurance. Your HELOC payment should be approx. $293.00 a month, but you will be collecting $2600.00 a month in rents if self managed. This leaves you with $1012.00 cash flow per month which is a 17.22% COC return. If you put all the cash flow back into your HELOC it will be paid back within 70 months or 5.83 years and from that point on your minimum cash flow will then be $1305.00 a month assuming you haven't raised rents.

Is this a good deal, in my book it is, I would pursue this deal. 

I hope this helps.