Help w/Triplex numbers

[Chris Jackson]

Hello BP world. I am crunching some numbers and wanted to throw some stuff out there to see what more seasoned investors think.  I am looking at a tri-plex.  What I have so far is this:

Asking Price $120,000

Rents = $575/$650/$500 ($1725/month), if tenants pay their own water/trash/electric/gas, otherwise I would probably increase all three by $75 and make the apartments 'all inclusive'.

Taxes & Insurance = $2600/yr (tax) + $1000/yr (insur)

The building couldn't get sold after being on the market for a while and was taken off the market and I've since contacted the owner. Hoping he'll either be willing to owner-finance to help me get in, or he'll take a lower offer price than $120.  I know this isn't a ton to go off of (I still consider myself a newbie investor), and there is more information that would help you guys make a good decision - but I'm just asking around to see if this looks like a deal even worth pursuing?  What would your ball-park offer be on this triplex?  $100K?  Less?  I know they say if you're not embarrassed, you're offering too much...

[Megan Greathouse]

I'm also pretty new to investing, but I've used the 50% rule as a guideline to see whether a property seems worth further investigation. If you're not familiar with it, the 50% rule states that about 50% of your rental income will go to expenses (taxes, insurance, vacancy, utilities, repairs, etc). So expect about $862.50 of your $1725 in rent to go to expenses. Then, deduct your mortgage payment from the remaining $862.50... assuming you get traditional financing (let's say 4.5% interest rate on a 30-year mortgage) and put 25% down ($30K if you buy at full asking price), your mortgage would be about $456. So $862.50 minus the $456 mortgage leaves you with $406.50 in cash flow every month. I personally am looking for places that cash flow $100 - $200 per door... so this is not bad in my book! And that's without any negotiation to get the price down.

But the 50% rule is just a quick way to assess, and you should definitely dig deeper into any property. Not to mention there's lots more to consider... does the property need work right now? If so, how much do you have to spend up front to make it rentable? If you do get owner financing, what will the terms be, and how will that affect your numbers? What's the neighborhood like... are renters in that area usually good/responsible renters, or would you have high vacancies in that area? Will you see decent appreciation over time? Lots to consider! Like I said, I'm new too... but the 50% rule is one way that I've been determining whether or not to dive deeper on properties. I have one SFH so far, and currently looking for a multifamily as well, so I'm learning a lot about number crunching right now as well. Best of luck. Let us know how it goes!