Puyallup property analysis

[Kevindra Singh]

Hi BP,

I'm a Seattle based newbie. I am planning to buy my 2nd fourplex, but this time in South Hill Puyallup, WA. I am new to Puyallup area, don't have much idea about the upside potential of the location. Does anyone have any idea about it?

3 units are in good shape but have to do some renovation on the 4th unit. Building condition is average I think, roof is ~15 years old (composite roof). So, may also need exterior painting + roof replacement. Also, I wanted to get a second opinion on what you think about the numbers:

• PP : $650,000
• Rent (after repairs): $1275*4 = $5100
• Vacancy (6%) : $306
• Maintenance & Repairs (10%): $510
• CapEx (5%): $255
• Utilities (10%): $510
• Taxes: (10%): $510
• Insurance: $200
• Management: $0 - planning to manage myself for now but may hire PM down the line (1-2 years later)

• Total Expenses: $1975
• NOI: $3125
• Mortgage (PI) (@ 5.5%): $2514
• Cashflow: $539 / month = $6468 /year

• Down (25%) : $162500
• Closing costs: $13,000
• Repairs: $35000 (don't know what repairs are needed yet)
• Total OOP: $210500
• COC return: 3.07%

Do my estimations look fine for the location? Am I missing anything? Thanks!

[Geordy Rostad]

@Kevindra Singh

Puyallup is a great area as long as you don't try to live there and work in Seattle or something. That traffic is a nightmare. But the town itself is pretty cute. Your numbers seem pretty reasonable for this area but I would suggest putting in a line item for property management. go get some quotes. Even if you're going to do it yourself, you should have monthly budget to pay yourself to do it. That way, when/if you burn out on it, you'll be able to afford it if you planned it out from the beginning.

Seems like the numbers might be tight for that as it sits. 

The other thing I'd say is that you should buy it at a price that makes sense as is. What are the rents now? Does it cashflow as-is with no repairs or changes? That's the kind of deal I'd want to make. I don't want to pay for a future pie in the sky valuation. I'd want it to make sense out of the gate.

All that said, everyone has different plans and goals for their real estate investments. Everyone buys real estate for different reasons so what makes sense to one person might not make sense to someone else.