Single Family vs Triplex

[Luis Sosa]

Two deals that I am trying to figure out which is the better investment what's your vote.

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(A)

Single Family 600k with 1% seller concession for closing plus 25k for furnishings to ready it for STR.

The upside is this areas within 1 sq mile has new builds going up for 1.3 - 2mil which will drive up my equity for this single family over time 5-10yrs. Large lot 10k sqft with 2 car garage for potential 4bedroom conversion in future. 

Down side is total out of pocket for two years is 120k down 60k pool 25k furnishings to see 18,774 by year 2 but potential for this property to be 1mil in 5yrs is high.

Currently 3/2 1460sqft no pool single family home total monthly expenses with STR $4,716 with out management fees.

First year strategy is to STR it as is for 7 months to catch the in season rates and break even.

Total Revenue: $55,600

Mgmt Fee (25%) = $13,900

Total 7 month expense: $33,012

Net Profit: $8688

Second year strategy is remove for 4 months at a lose of 9k and add pool for 60k. Put back on STR for in season rates. Potentials with pool is below. Net profit is less 25% management fees.

Gross revenue: $100,488

Gross Expenses: $81,714

Net Profit: $18,774

Annual Mortgage Principal paydown in first 10 years: $7K/yr

Total average annual gain beginning with year 2: $25,774

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(B)

Triplex 600k with 1% seller concession for closing trying to get it turn key at this offer but if not maybe 5k in furnishings. Currently used as STR revenue at 80-85k but recent renovations might bring another 15%. Numbers also work as Annual rental with 5k monthly revenue with less operating expenses.

The upside is this is just over one block from (A) property but the street divides the 1mil dollar home from the lesser home. Eventually the pricing will creep into this area after some time. Still a good area and visible no different then the (A) property area both have access to a nice popular park. Large double lot 12k sqft but property sits in middle. 

Down side is wood construction. Also STR currently running in county under 30days restrictions. Current property manager says they have not been asked to stop or comply and he himself next door runs another STR with no problems for many years. Fall back would be annual rentals.

Currently (2) 2/1 and (1) 1/1 - 1,903 sqft no pool official triplex home total monthly expenses with management fee 5,710.

As a STR

Investment Summary & Cash flow

Payback period (years) 6.75

Debt Coverage Ratio -0.51

Cap Rate 9.40%

Cash on Cash Return 14.82%

Monthly Cash Flow $1,482

Yearly Cash Flow $17,782

As Annual (self manage)

Annual Gross Operating Income $57,000.00

Annual Gross Operating Expenses $5,950.00

Annual NOI $51,050.00

Annual Loan Payments $35,934.91

Monthly Cash Flow $1,259.59

Annual Cash Flow Before Tax $15,115.09

Principle Reduction In First Year $5,493.58

Appreciation in First Year $12,000.00

Cap Rate 8.51

Cash On Cash Return 12.60

Returns With Principal and Appreciation Added

COC Return W/Principle added 17.17%

COC Return W/Appreciation added 22.60%

COC Return W/Principle + Appreciation 27.17%