multifamily buildings

13 Replies

im looking to buy a triplex. Anyone can give my gain in buying a triplex building? Im wanting to section 8.

Hi @Brandon Crumpton  

Please excuse me, but I don't understand your question. Can you provide some more details on what you are looking to accomplish with your triplex building purchase?

well basically I wanted to know will the building be profitable if the rent is bringing just a little under my mortage with having to add some to it. Put in mind I'll be living there rent free. My plan is to go FHA.

@Brandon Crumpton  

It's hard to say whether the building will be profitable or not without looking at some numbers. But I would run the numbers for the building as if the 4th unit that you will be occupying were also rented at market rent.

Read up a little on 50% rule to get a better understanding on all the expenses that go into running a rental property.

Its a triplex. I'll be staying in the 3rd unit. So the 2 other will cover the mortgage with me adding I think 100 cover the rest. But this was givin off a qoute. Just a gestimate. Im just wanting to know others opinions and outlook. Put in mind ill be bringing in my job income as well.

yes brianna in LA

@Brandon Crumpton I'd just do as @Sharad M. mentioned and use the 50% rule which is to take 50% of the gross potential income and allocate that to operating expenses, vacancy and capital expenses. See how the #s shake out from there. That said, the 50% will only give you a high-level estimate of where the property is at. You'll have to get the real income and expenses in order to truly see if it makes sense. 

As far as you bringing in your work income, that's not relevant because you'll want to see how the property performs on its own.

thanks. I'm new to this. Where can I get info on this 50% rule

@Brandon Crumpton  

The 50% gives you a rough estimate of how much your monthly costs are going to be.  Search 50% rule here on BP and you'll see hundreds of posts.

Simply $1500 monthly rent = ~$750 in monthly expenses via the 50% rule. Take that 50% and subtract your PITI. If there is a solid number left over, the property is worth investigating.

PITI is Payment(mortgage), Interest (on the mortgage payment), Taxes and Insurance. These are generally bundled together under conventional mortgages, thus their relationship here.

If there is a reasonable amount of money left over after your 50% Rule calculation, you need to dig into the ACTUAL numbers.

I would find out exactly how much the following expense are going to cost you each month. "The tenant pays" is a good answer as well. Put those numbers up here and I'll tell you what I would pay for the place.

Taxes

Sewer and Water

Trash

Heat/Utilities

HOA

Cap Ex and Ops

Insurance

Mgmt Fee - as a % (general consensus here on BP is 10%. include it even if you think you are going to self manage)

Vacancy- as a %. (8% represents 1 vacant month/unit/year)

well I'm a handyman as well so this will help out a lot. And I know a lot of guys who do maintenance. So that cut down a lot of my expenses. Im only paying water/trash.

Originally posted by @Brandon Crumpton :

well I'm a handyman as well so this will help out a lot. And I know a lot of guys who do maintenance. So that cut down a lot of my expenses. Im only paying water/trash.

 There are a lot of expenses beyond just maintenance, water, and trash.  Don't forget capital investments, insurance, taxes, business licenses, accounting, legal fees, turnover materials, vacancies etc.

I would take any marketing material with a grain of salt and do your own thorough research.

Interesting post.  Several items stick out at me.

1.  Purchasing a Triplex in North Hollywood would appear to have a premium price tag

2.  Living as a landlord next to your tenants is a challenge

3.  Living as a landlord next to your Section 8 tenants would make for interesting television

I'm curious how this plays out.

it will be very, very difficult to find a triplex in LA/Hollywood that you can house-hack and live rent-free in. LA market already has a high premium inputted into it

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