How do I run the numbers for a triplex?

Question

I have what i think is a "great deal." It is a triplex with 2bd 1 bth 1st fl, 2bd 1bth on 2nd fl, 1bd 2bth on 3rd floor. There aren't any triplex near it within 20mi which is a few counties over. I have researched the rents in that market and i found out that i can charge around $815 for the two 2bd rooms and $771 for the 1bd. The property needs to be rehabbed I estimated the repairs around 40k and they are asking 50k it is vacant but i see much potential. The property is in a rougher neighborhood but is basically on campus. The property is in Chester, PA. How should i run these numbers? Should i look for a NOI or ARV?

Raleigh Lewis · Answer

@Jeff Kehl Yes it would be my first investment property. I have a repair estimator where i can simply run estimates on every specific thing the property needs. It is a fairly rough area but the street its on is quiet with older owner, I think since the campus is so close i would be able to rent it out to students only since there is a major University within 5 min walking distance.

Jeff Kehl · Answer

@Raleigh Lewis is this your first investment property? If so I would move on because, just based on your brief description, I would bet this is going to be a challenging property. If it was easy to get it rehabbed and rent ready it is likely someone else would have done it already.

Also, yes they are only asking $50k and you need another $40k to rehab it, but understand that no banks and probably not many others will loan you any money on a deal like that. So you need $90k in cash IF your rehab numbers are correct.

Where does the $40k estimate come from? Make sure at least a few contractors you trust have looked at it.