Triplex Analysis. deal looks okay with self management

8 Replies

A 3 unit building just came on the market in my area that I think looks promising. These are the numbers I got with the BP calculator with self managing. With using a PM the property is looking to only make about 4%-5% CoC but I do plan on self managing the building. The building was built in 1972 with off street parking in what I consider a C area. I like that the place is a lot newer than majority of the property I see in my area which I think will help significantly with the capex. Also because of the location and unit sizes (1200-1500sq/ft) I think the place will rent out very easily.

https://www.biggerpockets.com/buy_and_hold_results/505355

Do you think this is worth pursuing or should I keep looking? 

Ya without the link working, we need numbers. I might be curious as to why this particular property is newer. Was it torn down and rebuilt? Are there any soil concerns? This is probably overkill, but still curious

Purchase price $230k
30 year loan @5% with 25% down
Unit 1 2bed/2bath $925
Unit 2 2bed/2bath $825 (15 year tenant)
Unit 3 3 bed/3bath $1200
All units also have a family room and laundry room. And there is off street parking in a paved lot next to the building.
Taxes $6042
Insurance $1500
Electric in common areas $600
Water, sewer, garbage $1100
Maintenance & CapEx (10% each) $7080
Vacancy (6%) $2124
Loan payment $11,112

Income $35400
Operating income $32276
Operating expenses $16322
NOI $16954
Cash Flow (after loan) $5842
$162 per unit per month
7.4% cap
9.1% CoC
Rent to value of 1.2%

5 year hold at 3% appreciation 2% income and expense increase
93.9% ROI and 14.2% IRR

The property is newer than most multifamily properties I have seen listed for sale, like the one built in 1884 that I looked at the other day but had severely outdated electrical (knob and tube) and plumbing which scared me away from the deal. In the immediate area around the property there are two fairly newer housing developments that where built on farmland that was sold off.

Updated 9 months ago

for the 5 year buy and hold its 75% ROI with 12% IRR is what I got with a rental calculator.

Still learning here, That said I like what I see so far, maybe not a homerun but looks like a good income producer. Insurance seems a bit low but your in a different area then my limited exposure. Is that from a bid/quote?

Advice from the forms I think would be get the PM aspect back in the numbers. it leaves you that potion later with out souring the deal. (and can be realized as cash flow in the meantime.)

Thats numbers. I hope you get some solid and experienced input fast, I see nothing on loan going in or exit strategies (I am learning to shoot for 3 exit options min) so I have no better ideas for you. sorry.

Posting to BUMP, get you some more eyes on the post.

good hunting

Kirk

Thanks for the input. I was looking at the numbers for holding and it seems like after 11 years my IRR starts to decrease. It peaks at 15% at year 10 and by year 15-20 it’s around 10% with self management. So my game plan was to self manage and being it would be my first property if I get to the point where I can no longer self manage or I approach year 10 I would like to do a 1031 exchange on the property.

I forgot to add that even if I’m forced the sell the property early I should be able to break even on year two and any year after I will have profited on a sale. I have not called for a quote on the property yet for myself. The insurance price is from what the current owner is paying on the property.

Numbers look pretty stellar to me. Are your taxes really north of 2.5%? I know they vary state to state, it's just a higher rate than California (go figure). I might also see about getting a better rate on the loan. How is the rentability of the area given the 15 year tenant? I can appreciate the stability,but thats gotta move up in price. Looks good though.

@Kristina Heimstaedt Yes taxes are that high in my area. I'm currently paying $3000 / year for my 3 bedroom house that appraised at only $100k. I was just ball parking the interest rate on the high end. I'm sure with my credit score I can get something around a low 4 or better. The rent ability in the area is very good. I was reading the average vacancy rate in the area is only 5.3% and the property is located just minutes from a shopping mall, bowling ally, hockey rink, major highways. Pretty much anything you need to buy is within a 10 minute drive. 

Half a mile away from the property is a big apartment complex that has a fitness center, tennis court, basketball court, pool. They have similar sized units as this property and they are getting $1090 / month for the 2 bed room and $1205 for the 3 bedroom units. So I was thinking there should be room to up the prices on both the two bedroom units even though I do not have the same amenities.  

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