Triplex in Birmingham Al, first deal
The property is a triplex in the Southside neighborhood of Birmingham AL (B- area, primarily student renters, walking distance to UAB, the local university). The deal is not a home-run but seems solid. The property is 2 story with a basement. It is divided into 3 units, all 2 bed one bath. The property seems up to date on maintenance ( 2 year old appliances, recent electrical, 2 year old AC units), and the upper 2 units are above average size and condition for the area. The basement unit is a bit smaller and has carpet. 2 units are currently occupied at $775 (3rd floor) and $550 (basement). The second floor unit was $750 but the tenant just moved out.
I have the property under contract for $131K with the seller paying 3K in closing.
Here is the math that got me to this point:
Rent Rates:
Apt A $775 Rented. New tenant in March 2013.
Apt B $750 Vacant, tenant moved out 2 weeks ago.
Apt C $550 Rented. Same tenant 3+ years. Never late. Month to month.
Total: $2,075
Gross Income (12 months) $24,900
Vacancy (assumed 10%) $2,490.0
Effective Income (12 months) $22,410.0
Taxes $2529 Actual
Insurance $1970 As Quoted, can probably find cheaper
Repairs (Assumed 5%) $1,245.0
Utilities (water and Sewer) $3000 High Estimate. Actual for 2012 was $2160.
Total Expenses: $8,744
Net Income (12 months) $13,666.0
Cap Rate 0.105123
Mortgage Monthly payments $870 (Estimated for 131K purchase price, 25% down.
For 12 months: $10,440
Cash Flow: $3,226.0
What do you think? I am waiting for the home inspection and appraisal for the loan. I am pre-qualified for a conventional 30 year fixed loan with 25% down and about a 4.87% APR. My plan is to hold the property until payed off. I may do a cash out refinance to purchase additional properties some time in the future (2 years).
Any comments and suggestions are appreciated.
Mike