Triplex Deal w/ Lots of Rehab

1 Reply

Help see if we should go ahead with this triplex opportunity. 3bed/3 bath 1450 square feet.

Currently in due diligence with asking price of $70,000 w/ estimated rehab costs of $80,000 including:

-Asbestos Abatement

-Paint

-New Appliances for Kitchen and Showers

-New Boiler/Venting system

-Plumbing and Electrical

-Header in the basement

-New Windows

-New Roof

-Tree Removal

Rents in this area for the single units (400 sq ft) = $700 and one larger unit (800 sq ft) = $900, total = $2300. Good variety of jobs in the neighborhood, safe and good schools. Street parking.

We're a little worried our ARV will be only about $140,000. A duplex in the area just sold for $192,000 at 1800 sqft. This would be a cash deal and we would like to refinance out after 6months - 1 year.

What do you guys think? Should we try to ask for lower maybe $50,000 since there are so many costs, walk away, go ahead at $70,000?

Mia Edgar

@Mia Edgar

Dont walk but instead run away,  if you have to do a bunch of work you need to make sure that property is being bought at a price where you get actual sweat equity, this deal it looks like you would just get sweat and no equity.  Obviously if you can buy it for much less then the numbers are different.  

One rule you can use is the 70% rule,  which says that you should only pay 70% of the after repair value minus costs,  In this case applying that rule means that you should pay  (70% of 140K) -80K = 18K Personally I think that you might be able justify a little more than that like an 80% rule but you are buying it at 100=% and thats a bad idea

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