First Deal...Any Thoughts?

[Shannon Moore]

I have been reading all of your posts for the past few days and have decided to sign up to be a member. It seems as though many of you have a wealth of knowledge to offer. So here goes...

I have a letter of intent to purchase two triplexes in SW Florida on the same piece of property that we had subdivided so we didn’t have to get a commercial loan. They are located in a great area, about a block from the water and the city is building a big park, fishing piers, bike path, children’s playground, etc, along the water. My father and I are going in as partners on this deal and both of our credit scores are above 750.

We were planning to do a first mortgage with an interest only loan at 7% for 10 years and amortized over 30 years. The seller is going to take a second mortgage for 20% of the purchase price at 7.5% amortized over 30 years and balloons in 10.

Purchase price is $195,000 on each triplex each are bumping the purchase price up to $200,600 to include all closing costs. They should appraise at around $250,000 each. We had a home inspection and they are both in great condition.

As stated above, we are doing an 80% first mortgage and a seller held second mortgage for 20% at a rate of 7.5% amortized over 30 years and to balloon in 10. We won’t be putting anything down. So it will be 100% financing.

Each Triplex:
1st mortgage $160,480=$936
2nd mortgage $40,120=$281
Insurance= $204
Taxes= $312
Vacancy ratio at 5%=$105
Maintenance at 5%=$105
Water=$144 for 4 units, 2 units are on separate meters. When the leases come due we will convert the other 4 units to separate meters.
Expenses=$1943

Rents are:
2/2=$795 each triplex
2/1=$695 each triplex
1/1=$595 each triplex
Income is $2085

Any thoughts on this deal? Do I have all of the expenses covered? Does this sound like a good way to go with the financing? What would you do differently, if anything?