Is this a good deal?? Triplex analysis for buy and hold

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Is this a good deal?? Triplex analysis for buy and hold

Juan Abreu
Houston, TX · Member since 2019 · 21 posts · 4 votes

Hey guys, 

I'm looking at this triplex that looks like a good deal (for a rental property) but not really sure if I am overlooking anything. The asking price is 350,000 for a triplex with 3 units. 2 units have 2 bedrooms, and 1 unit has 3 bedrooms. Each of the 2 unit bedrooms is rented out for $1000 each and the 3 bd is rented for $1500 so producing a total of $3500. This meets the 1% which is good for Houston in my opinion, and also seems to meet the 50% rule.

It is not in the best area but it is really close to a couple of universities and 5 minutes from downtown so I think there is a lot of potentials for tenants. I have also checked and it is not in a flood zone.

One thing that stood out to me was that the house is appraised by the County Tax office at $406K buy it's selling for $350K. Should this raise any red flags?

Please take a look at the analysis below and feel free to let me know anything that i might be overlooking or did wrong.

Thanks!

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Adam D Rinehart
Investor · Houston · Member since 2019 · 153 posts · 139 votes
6y

@Juan Abreu from what you have said and the numbers provided, this looks like many a 3rd Ward deal I've looked at. I'm not sure what value add you could do to the property to increase equity, but the current rents are a bit below the HUD FMR rate for 2 BR units. I have a 2/2 SFR and a 1/1 duplex in 5th Ward. The 1/1 fair market is $900 and the 2/2 is $1100. For context, I paid $100k for the duplex. And $87k for the SFR so $350k for a triplex is high unless you're in an area like Cody mentioned.

Absolutely fight the HCAD value. You are likely “benefitting” from new townhouse/condos being built in the area under the assumption of appreciation by gentrification.

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  • Jaysen Medhurst
    Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
    6y

    We need the actual breakdown of expenses to be of any help, @Juan Abreu. You can't just go by the 50% rule.

    0Reply
  • Juan Abreu
    OP
    Houston, TX · Member since 2019 · 21 posts · 4 votes
    6y

    @Jaysen Medhurst Sorry, here is what I used for my analysis.

    0Reply
  • Cody L.
    Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
    6y

    1) The only red flag about high HCAD value vs. price is you're going to have a way higher tax bill than you should.  

    2) $300k for a triplex ($100k/door) can be a great deal (Montrose) or a crappy deal (5th ward) depending on where it's at.  I wouldn't look at rent ratio alone. 

    That said, if you're getting $3k+/month of rent on a $300k triplex you should be good to go.  Esp considering you should be able to get super cheap money on it. 

    0Reply
  • Jaysen Medhurst
    Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
    6y

    Thanks, @Juan Abreu.

    • I think your vacancy is high. I use 8%.
    • I'd like to see your CapEx split out from your repairs. Overall estimate is good, though, at 15%.
    • You'll likely have water/sewer. Figure $30-40/unit/month. Call the local water department and get last year's bills.
    • What about Management (10%)? Always include this, even if you plan to self-manage in the beginning.
    • Any lawn care?

    My math is showing this ~$200/month in the red. Yes, you're hitting the 1% rule, but those taxes are killing you.

    1Reply
  • Adam D Rinehart
    Investor · Houston · Member since 2019 · 153 posts · 139 votes
    6y

    @Juan Abreu from what you have said and the numbers provided, this looks like many a 3rd Ward deal I've looked at. I'm not sure what value add you could do to the property to increase equity, but the current rents are a bit below the HUD FMR rate for 2 BR units. I have a 2/2 SFR and a 1/1 duplex in 5th Ward. The 1/1 fair market is $900 and the 2/2 is $1100. For context, I paid $100k for the duplex. And $87k for the SFR so $350k for a triplex is high unless you're in an area like Cody mentioned.

    Absolutely fight the HCAD value. You are likely “benefitting” from new townhouse/condos being built in the area under the assumption of appreciation by gentrification.

    3Reply
  • Juan Abreu
    OP
    Houston, TX · Member since 2019 · 21 posts · 4 votes
    6y

    @Jaysen Medhurst Thanks, I will include those numbers in my calculations. Would have to offer way less for the numbers to work out that way

    @Adam D Rinehart Man, how are you getting those prices in Houston? Have those been from the MLS or through other methods? All triplex i've seen are around that price.

    0Reply
  • Adam D Rinehart
    Investor · Houston · Member since 2019 · 153 posts · 139 votes
    6y

    @Juan Abreu 1 was an MLS find, the other was in the BP marketplace. The BP one is a duplex and we did seller financing on that one. The MLS deal I just negotiated with the seller. I recommend reading never split the difference by Chris Voss, and then I highly recommend immediately reading it again. Keep in mind that the list price is just an ice breaker in most cases but you have to be willing to make a deal happen by knowing what you want, at what price, and under what terms.

    0Reply
  • Ryan Johnson
    Rental Property Investor · Houston, TX · Member since 2018 · 174 posts · 100 votes
    6y
    Originally posted by @Juan Abreu:

    @Jaysen Medhurst Sorry, here is what I used for my analysis.

    Like the sheet. Mind sending me a copy? 

    0Reply
  • Cody L.
    Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
    6y
    Originally posted by @Juan Abreu:

    Hey guys, 

    I'm looking at this triplex that looks like a good deal (for a rental property) but not really sure if I am overlooking anything. The asking price is 350,000 for a triplex with 3 units. 2 units have 2 bedrooms, and 1 unit has 3 bedrooms. Each of the 2 unit bedrooms is rented out for $1000 each and the 3 bd is rented for $1500 so producing a total of $3500. This meets the 1% which is good for Houston in my opinion, and also seems to meet the 50% rule.

    It is not in the best area but it is really close to a couple of universities and 5 minutes from downtown so I think there is a lot of potentials for tenants. I have also checked and it is not in a flood zone.

    One thing that stood out to me was that the house is appraised by the County Tax office at $406K buy it's selling for $350K. Should this raise any red flags?

    Please take a look at the analysis below and feel free to let me know anything that i might be overlooking or did wrong.

    Thanks!

    I see three on the MLS that might be the one you're talking about. One of them is just north of 610 (On Bennington, by a 51 unit of mine). One is in 5 ward (On Hutton, near a 32 unit of mine), and one is just north of downtown (On Chapman, near a 53 unit of mine)

    Happy to give you more thoughts on it if you want to tell me what listing it is. It's on the MLS. No one is going to 'steal' the deal.

    0Reply
  • Juan Abreu
    OP
    Houston, TX · Member since 2019 · 21 posts · 4 votes
    6y

    @Cody L. Yeah that'd be great. It's the one just north of 610. Thanks!

    0Reply
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