First 3-family deal. Thoughts?

Question

Hi all,

Just got an offer accepted on a 3-family property. I’ll be teaming up with two partners (three of us total) and wanted to run the numbers by the community to see if this makes sense. I'm planning to self-manage for now, but wanted to factor in a management fee for conservative underwriting.

Key Numbers:

• Purchase Price: $650,000
• Layout: 10 beds total (4-4-2 across 3 floors)
• Projected Rent: $84,600/year (fully leased)
• Expenses: ~$25,460/year (tenants pay gas/electric)
• Net Operating Income: ~$59,140
• Cap Rate: ~9.1%

Purchase Price: $650,000

Layout: 10 beds total (4-4-2 across 3 floors)

Projected Rent: $84,600/year (fully leased)

Expenses: ~$25,460/year (tenants pay gas/electric)

Net Operating Income: ~$59,140

Cap Rate: ~9.1%

Financing Plan:

• Loan: $487,500 (25% down)
• Interest Rate: 7% (DSCR loan)
• Estimated Debt Service: ~$38K/year
• Projected Cash Flow: ~$29K/year

Loan: $487,500 (25% down)

Interest Rate: 7% (DSCR loan)

Estimated Debt Service: ~$38K/year

Projected Cash Flow: ~$29K/year

Jake Yuskaitis · Answer

renting by bed?

Jaycee Greene · Answer

@Zulu Black Where is this triplex located, Upstate NY? And a DSCR at 7% is actually somewhat high, @Yale Goldberg, depending on the borrower's credit score. For 75% LTV, I'm getting quotes for my clients with the best credit scores at 6.40%.

Michael Goldberg · Answer

I would have a few more questions on the area, local cap rates, current tenants, but it seems like it could be a solid cash flowing / CoC deal.

@Zulu Black My biggest question is where are you getting a 7% DSCR loan? I'm seeing near 8 for DSCR, but may be looking in the wrong place!