Cash flow seems good! Am I missing something?

8 Replies

I am currently looking at a triplex with a detached garage apt. It is in the Spring, TX area just north of Houston. It is a B to B+ property and neighborhood. Some room for forced value and appreciation. It is currently owner occupied, with 2 units rented long term, and 1 unit used for AirBNB, I would not continue doing AirBNB. I would NOT owner occupy it.  It is currently set up for owner paid utilities. Shared laundry between all 4 units. I would be purchasing this with a partner who is fronting the down payment. Long term plan would be to refi out in 6-9 years in one manner or another and repay my partner plus 5%. 

Purchase Price: $335,000

Loan: 30 Fixed at 4.875, 25% down

Rents: $4,300 (conservative but reasonable)

Utility Bill Back: $200 (Should increase at release for the current tenets)

Utilities: $7,000 (Based off their actuals plus some fluff)

Repairs: $2,000

CapEx: $3,600

Vacancy: 10% (Somewhat a shot in the dark, I can't find any good data for the area)

Taxes: $7,700 (Current tax rate times the purchase price)

Management: 9%

Cash flow with PM: $450.94 per month 

Cash flow no PM: $815.44 per month

It is on a well and septic. From a previous contract they had the septic inspected and the inspector said they needed a larger system. The current owner said they have had no issues, and have only had the tank pumped once while owning it in 3 years. Both my agent and I feel she is trustworthy. Granted everyone is biased towards themselves. It also has about 3-4 years left in the roof. My cash flow is planning on replacing the roof immediately with a standing seam.

Am I missing anything? What do y'all think? It seems like a pretty good deal, though not perfect.

Thanks!

Daniel

Updated 8 months ago

Insurance is $2550 annually.

A couple things to think about:

  1. Do your projections include the cost of insurance?
  2. Have you factored in closing costs?
  3. Are the numbers you stated for repairs and capex the annual numbers or the initial costs when you acquire the property?

@Michael McKay Whoops! Yes they do factor in the cost of insurance. Somehow I forgot to put that on my post. I will edit that.

2. Yes, closing costs are factored in. 

3. The $5,600 is an annual accrual. I do have the cost of a new roof, and other minor things factored in. Considering that into my cash flow to pay that interest back, I would personally be cash flowing $350 with myself managing. 

Thanks!

What about lawn care expense? Who is responsible for lawn care?

@Daniel J. Since you will be leasing Two units after purchase, the ( Owner Occupied unit and the AirBnB unit), there should be One months leasing cost for each if you're using Property Management, if self managed the numbers are ok, Also I didn't see if the current leases are long-term tenants or fairly new.

@Ray Johnson I would be self managing. The current tenants are long term. What would you consider to be good numbers?

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