Good deal or not??

Question

I'm interested in a triplex near a college for 100k. A triplex down the street is renting for 455 a unit. These are the numbers I used to calculate cashflow. Mortgage is 665.30 for 100k at 7%.
Ins. is 83 a month
tax is 100 a month
10% vacancies is 137
10% for management is 137
After all that I get a cashflow of about 243 a month. Is this a good deal or not. I feel like I used conservative numbers but I'm not sure as I am new to this. Any input would be appreciated. I would probably save most of that 243 for repairs. I have a good amount of cash in the bank as a reserve and may put down a deposit if the bank requires it. I think the house is valued at around 140K. But again, I'm new, not sure.    Thx

David Carter · Answer

dont really plan to buy this property anymore. But the idea is to get something with positive cashflow. I am not looking for a tax write off or anything. and yes, that price was below market value. I just saw on the news, raleigh nc was the #1 sellers market in the country.

N/A N/A · Answer

in NC for that unit, just curious are you paying fair market?  like said earlier, there are more variables... 
Are you focusing solely on positive cash flow monthly or is this a property that will give you potential tax wrtie-offs or build equity for sale at a good rate?

David Carter · Answer

its in raleigh nc, and its got 676 sq ft per unit. 2 beds 1 bath each. I might could rent to two college students and charge em like 250-300 each, but i dont think they would like sharing 1 bathroom

Michael Rossi · Answer

bigdave19,

As Rehab said, you missed most of the operating expenses.  Here is how I see the real numbers:

Gross Rents:  $1,365
Operating Expenses:  $682
NOI:  $683

Mortgage:  $665

Cash Flow:  $18 per month or $6 per unit per month.  UGH!

Needless to say, I would not do this deal.  Furthermore, I'm seeing interest rates closer to 8% for NOO.  If that were the case, the mortgage payment would be $733 which would mean a negative $50 cash flow.

Good Luck,

Mike

Steve Nicewarner · Answer

You never said how large the units are, or where in NC the building is. Even for a 1/1, $455 per month in rent seems low. If you could get that up to $600, then your numbers will look a lot better.

Richard Warren · Answer

You are missing some expenses like maintenance, administrative costs, etc.  You will probably have a true cash flow of less than $100/month.  You might want to search some of MikeOH’s posts for better ideas on how to calculate the real numbers on rental properties.

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