Would you buy this triplex + duplex?

Question

I'm considering buying this multifamily deal, but don't know if the numbers are good enough. I know multifamily is evaluated differently than SFRs, but don't know much about it. Below is the owner's description:

I have owned this property for 9 years but now living out of state. Unit produces $3100 + laundry mat income has separate meters. Duplex units are large 2/2 units occupied, triplex includes 2 large 1/1 units and an efficiency. In nice quiet neighborhood, I lived in one unit for a few years before I got married and really enjoyed it. *** just did a total remodel on duplex to include all restrooms including tile throughout and new kitchen cabinets and granite counter tops**** Asking $220,000. *** will consider owner finance ***

He is willing to owner-finance and below is what he emailed me:

Monthly of $325.73

So, from what I see, assuming that I get $200/month of laundry (is this too much?), I would be left with $1,586.77, minus 30% of vacancy, repairs, and cap ex savings, I get $1,110.74 of cashflow/month.

Assuming I pay $6k of closing costs, I would get 39.8% COC return.

This seems like a great deal, but I'm new and I know that I'm missing something. Please dissect this and let me know I'm missing.

Thanks in advance!

Lisa Moon · Answer

I know a good CPA in San Antonio who invests in real estate and would know all the angles, if you message me I can forward you his info.

Ben Leybovich · Answer

Judging by your first paragraph, you should stay out on this one :)

Aroldo Villarreal · Answer

@Brian Gibbons I have neither. I am looking for a good CPA in San Antonio though. I had never heard of a CCIM.

@John Hamilton I will ask him for the books and take them to an accountant, once I find one I want to use. As for the lawyer, do I just google RE Lawyers?

I don't know if there's anything owed on the equipment, didn't ask him and never crossed my mind.

The loan would be for 30 years. The vacancy is maybe one month a year per unit, if that. I would be managing the property myself, but should factor in property management just in case I want to do that for the future.

Thanks for all these great questions that slipped my mind!

Brian Gibbons · Answer

CCIM is a designation that understands commercial property, as @Joel Owens  probably could pass that test.

If I were going to invest in a commercial deal I would use a CCIM, see

http://www.ccim.com/about-ccim/what-ccim

CPA and a commercial attorney.

John Hamilton · Answer

There is plenty of information on here in understanding the costs of being a landlord for your situation. Read that first and present your questions that aren't answered in the Learn, Analyze and Forums.

As for the deal, ask him to see his books and take it to your accountant to see if he can run a quick analysis and give you the results on if this is a good deal.

Next find a lawyer to over the contract to ensure you have protection and not getting taken for a ride, especially during closings.

Forget about the laundry as that revenue is paying for maintenance and servicing of your equipment. Is there anything owing on the equipment?

The numbers seems decent at a glance, but with that much down, he sure is charging you a lot for interest, IMHO. How long is the loan for? Is the vacancy rate decent? Are there any immediate issues you are facing (evictions, damage, equipment, tax assessments, etc)? Are you managing the property yourself? Make sure you know what you're getting into all the way around before you just go off how much money you think you'll have come the end of the month.

Brian Gibbons · Answer

@Aroldo Villarreal

Do you have a good CPA?  or a CCIM?

@Ben Leybovich  the multi king, I beckon thee!

Aroldo Villarreal · Answer

He gave me the rents for each unit and the taxes look pretty close to what I pay on my SFR's. The insurance seems low, but I don't know if that is because he owns them outright since I pay about $800/yr on a SFR.

Billy Cones · Answer

How do you verify the financials?

Would you buy this triplex + duplex?

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