Purchasing a 3 unit property

[Janea Brown]

Hello,

My husband and  I are in the process of closing on a 3 unit building in two weeks but we are still doing our homework and are a little uncomfortable.  

1. We are buying the building for $169,000.00 and we are putting $93,000.00 in repairs.  The appraiser came in low because we are not making any updates to the house we are just getting it back to running properly.  Which came in at $240,000.00

So The bank bank is giving us $169,000.00+$75,000+$11,000+fHA insurance= loan amount of $257,538.00

We are putting our own money of $25,625.00 

Rent we are asking for is $1200+$1200+1270=$3,670.00

yearly Expenses                                                        Revenue          

Taxes $3,328                                                          Rental Inc. $44,040.00

Ins. $2939                                                               Vacancy (15.5%) $6878

Maintenance $1200                                            Net Income  $37,212.00

Utilities $5400

Total Expense  $12,867.00

NOI $24,345.00 Cash flow $5,067.56 Cap Rate 8.6%

COC 19.77%

The thing of uncertainty is 

1. This is our first time doing an FHA 203K we are not doing any updates to the kitchen nor the bathroom just making sure the house is functioning running new electrical wire, repairing plumbing, back stairs, doors, few windows, painting, roofs, garage doors, finishing wood floors, and cleaning. So a tenant will have a clean functioning apartment but not an updated apartment. As I am looking at the houses and apartment renting in that area I'm getting that this is the average between $1100 - $1195.00. With 3 bed/ 1 ba mine is a 3 bed/ 2 ba and larger sq.ft.

2.  With repair budget so tight I don't want to add any more money because we are already at $283,163.00 however the appraisal came back at $240,000.00 the comps he used were $260K, $275K, $325K.  Taking off $20,000 for our property being average.  Therefore my plan is to continue to update through the years and to pay the mortgage biweekly and refinance in 6 years to a 15 year and pay doing a biweekly also.  Also the appreciation in that area is last 12 months 8.8% and in 10 years total 19.9% average 1.76% (really don't know what this means to much but this is what I got from the demographic study I did). 

Please if you have any thoughts my husband is bearish, he wants to walk away because of these uncertainties and I'm bullish that this will work but I'm still doing my homework even though we are looking to close in two weeks.  This is our first real estate deal from having done real estate 10 years ago and I'm a little nervous.