SFH or triplex? Hard to decide which is a better deal

7 Replies

I'm supposed to look at a triplex and a single family home soon.  I'm trying to analyze both without being inside either one yet. 

Here are some of the numbers. 

The Single Family home is 3/1, 992 sq ft, built in 1987.  I've been told all floors coverings need to be replaced and it needs some drywall work, small holes, and painting.  I think the roof has been replaced, but I'm not sure yet.  It has electric baseboard heat and no central AC. 

They are asking $85K.

I'd try to offer perhaps $60K first, but could go up to say $75K.  Here are numbers based on getting it at $75K. 

Buy price, $75K

Rehab costs, $20K

Closing $2.5K

Total is $97.5K  

Rent could be $925

Cash flow is $333.45 

COC ROI is 10.67%

Total cash needed based on rehab estimate and such is $37,500.  I'd put 20% down on it. 

If I could get it for less than $75K and if rehab could be done cheaper, which I think it could, the numbers are even better. 

The triplex has three 2/1 apartments in it.  Each has central AC and I think a heat pump. I've been told the inside is in good shape.  All 3 apartments have tenants.  I'm not sure if the roof has or has not been replaced yet.  It was built in 1995.  There is no grass to cut.  I've been told nothing needs to be done inside at this time.  

Asking price is $225K.  I'd try to get it for $190K to $195K and see what happens. 

Let says I could get if for $205K.  Let's say it needs a roof and it costs $7K.  

Here are the numbers.  

Buy for $205K

Rehab for $7K (roof)

Closing costs $3.5K

Total is $215.5K

Rent is current is $1780.  They are under market value.  Let's say I can bump rents up to $650 when leases are renewed.  That gives me $1950/month. 

Assuming the above,

Cash flow is $559.91

COC ROI is 10.88%

Total cash needed is $61, 750.

If I could get it for a better price, and if the roof isn't needed yet, the numbers get even better.  The unknown is can I get it for $190 or $205 or $215K.  

Based on the above, COC ROI is very close to the same for both. Cash flow is higher for the triplex, but so is the cost out of pocket to get it.

I currently have 2 SFH's that I'm renting. The above one is in the same general area and it would give me 3 in that basic area. Since I'm spending less out of pocket, I could save up to get a 4th SFH sometime later this year.

If I get the triplex, it takes more cash to get it.  I'd not get any other properties this year, but hopefully would in 2019.  

There are a lot of assumptions, but based on what I wrote, can anyone give me any advice on how to decide between getting the SFH or the triplex?

I don’t like that MF deal. I think it cashflows because you are buying it with $60k of your money.

I have a 6-unit under contract at $190k that rents for $3200 (5 tenants under market by $75-150/mo).

Thanks, @Dennis W.   In my area, MF are hard to come by.  I know of a duplex for sale that rents just a bit more than this triplex, but they are asking $239K.  That's a loosing price there.  I have to put down 25% on a triplex, so that's why my down payment is so high. 

The only other MF's I've seen since I've been looking over the past year or so are super old homes that have been made into duplexes that sell at high prices and don't rent for much.  The triplex I'm considering is probably about the best MF home I've seen in this are for sale.  If I can get it under $200K, it's a great deal here in this small area. 

I'm not ready to buy out of my area yet. 

I'm excited to look at both of these properties in person to see what I think. I do hope others will respond with their opinions on both of these.  

Totally understand. How about closer to UVA?

Are maintenance, capex, and vacancy included in, or in addition to, your projected cash flow numbers?

Yes, @Eric James , vacanies, capex and repairs are all included in my numbers.

@Dennis 

@Dennis W. from what I've seen, prices closer to UVA or JMU are higher than here in the Valley.  I have a realtor/investor friend/mentor that is helping me. She has probably around 100 or many more doors. She thinks the triplex is a good deal for around here just based on the price. Neither of us have been inside of it yet.  Same for the single family home. The downside to the home it's 3/1 and not 3/2.  Plus, it doesn't have a basement. 

My other 3/1 home is the same. 

My 3/2 home has a basement and is much better.  

That makes sense. I also didn’t catch the 7k earmarked for a roof. I guess Richmond is a bit far from you but I would think much cheaper acquisition cost... even staying out of  the crappier parts of city. Granted it’s been 15 years+ since I was down that way... Go Spiders ;)

I prefer to keep my rentals close to me for the time being while I'm building my business. Perhaps down the road, I'll buy something further away.  We shall see. 

I'm supposed to look at both properties on Monday.  I'll see what happens.  

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