My First Tri-Plex Rental Property

1 Reply

Hello All. Just looking for some advice on my first property. 

So this is a for sale by owner property....basically just turns out to be a guy i know who is looking to cash out of his investment after about 10 yrs. The property was building the 70's its a 3 story triplex with a 1bed 1 bad ~700sq.ft. per unit. There are 8 buildings like this on the street and it is in a very nice gated community. Its not in the best shape but he has remodeled 2 units in the past 6 months with the 3rd unit being finished soon. This building has foundation problems and can only be sold with Cash or conventional loans because of it. I plan to get conventional financing and put the 20% down.

right now the units are being rented out for $625 mo. for bottom and middle floors. The tenants are on separate electricity but the owner is paying for the water which is a min. of $120 mo.

There is a property across the street for sale for 125k.. he said himself that was too much and mentioned lightly he would sell his for 110k. I want to make him a strong offer that would work out for both of us but i'm looking for good cash flow. 

Long term... its a little scary knowing that these buildings are so old and may need major replacements roof/siding/heating or air.

-Does this seem like a good investment?
-how much should I offer?

any additional advice would be appreciated! Thank you

Hey Mitch,

If you end up putting an offer in make sure to have an inspection contingency. Don't be afraid to bring in a basement foundation repair company and get a quote to get the issues identified and fixed. 

20% of 110k =  22k Down

110k - 22k =     88k  Financed

88k @ 4% for 30 years ===  Monthly Payment of $420  (principle and interest)

Other Numbers you'll need:

Property Taxes  (get on the county website)

Insurance (just call an agent or ask owner)

Repairs    ( Really depends on condition of property, 10-15%)

Utilities    (get as many months of bills as possible)

Property Mgt (even if you plan on doing this yourself)

vacancy     (depends on market and property, 10%)

Lawn

Cap Ex    (depends on property but sounds high on this building) 15%

These are VERY VERY rough numbers but lets look anyway...

Gross Rent- 22,500 (assuming all 3 are rented at 625 and no washing machine income)

Expenses

P&I-          5,040

Taxes-      2,200 ( I figured 2% of home value)

Ins-           800    

Repairs     2250     

Water       1800    (150/mth)          Look into heat bill

Vacancy   1125

Prop Mgt  2250

Lawn         300

Cap Ex      3375

Total        19,140

 

22500-19140=  3,360   Cash Flow Yearly

Investment of 22,000 /  3,360 = 15.2% Return

Plus tax advantages, paying a little down on mortgage, possibly appreciation, learn a lot.

Location, Basement, Local Market, Comparable properties, and firming up numbers ALL need to be looked into.

Let me know what you think! 

Good Luck

Aaron

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