triplex double check deal

3 Replies

I am beginning to look outside of my area for more properties. I came across a triplex that is in more of a rural area. All units are currently occupied. I did not physically see it yet but the listing shows it as average. I did an analysis on this and for me the numbers look pretty good. My real estate agent believes that the numbers only look good because of the rural area and age of home. I took that in account even though it was listed as "average" so a lot of my numbers are higher than I would normally choose. Even after I still thought the numbers looked good, my agent however seems to disagree. When it comes to determining vacancy, M & R and CapEx my confidence on my numbers falls short so I am hoping for a double check.

Current income $1650/month

Property price $60,000

I am still newer at this so I would likely mortgage it.  I factored 20% down at 5.5% interest over 30 yrs.  Mortgage about 275/month

Taxes shows to be about $2,000/yr.

Insurance 600/yr.

This is where I start throwing numbers in that make me unsure of myself

Vacancy 10%

PM 10%

M & R 10% 

Cap Ex 15%

My numbers come out to 

Cash flow: $434/month

Cap rate: about 14%

Cash on Cash: 27%

ROI: 57%

Do you believe this is a good deal and would you buy it if it is really an "average" condition property.

If not a reason why would be greatly appreciated!

Did you run it through the BP tool to get those numbers?  They said one of the biggest mistakes people make is leaving out stuff and their tool seems pretty comprehensive.  If you ran it through theirs to get those numbers (and didn't leave out numbers you didn't know), then it looks good to me, but then again, I have a financial manager to make my final decisions for me.  lol  I'm not the BEST person to ask, but I saw no one else was answering, so I thought I would.

Good luck!

@Shawn S. The numbers that you have put in that we're percentages are close to the ones I use in my area and I've had good luck so far. Be sure to get actual numbers for taxes, insurance, water,sewer, and electric if you pay them. The fishy thing I see is the rent Is very high for the price of the property. Why is it being sold so cheap? Or the other question is why is the rent so high? Does the owner pay all utilities or something?? Is it in some kind of rough area? Flood zone with high insurance? Something is a foot here I think. You didn't say what realtor you are using but I always use a local realtor. They will be familiar with that property and maybe can tell you why it's so cheap. On the surface your analysis looks good. I would use caution though. The purchase price is too cheap for that much rent. I don't know why your agent would say those numbers don't look good. They look ok to me. Many realtors aren't investors and as such may not be good places to get advice from. RR

I agree, the numbers look promising on paper. I’d find out why your realtor disagrees, knowledge from a local can be invaluable. I too suspect something at that selling price versus the gross scheduled income.

I have a few questions:

Are the meters separated?
How old is the home?
What does the landlord pay for?
What’s the population of the town?
What kind of neighborhood classification is it?
Being in a rural area, it is on a dirt road?

Julian

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.