Newbie investor buying a Tri-plex in south florida

[Aaron Howard]

Hi BP!

Would appreciate a little feedback from my fellow BPers! Here is the story...bought a fixer upper a couple years ago and have a nice bit of equity in it now(its my primary residence). I took out 115K worth of equity out of it and have another 60K in savings. I am an active realtor in the area as well(fairly new in the biz).

I have been looking around for a investment property for the last 3 or 4 months and doing my homework on real estate investing in general. I have considered several different options, and have decided that i really want rental income and would like to start building my portfolio to something substantial. I have been looking for multifamily and have found something i like. Its a Tri-plex that is 10 min from my house in an "up and coming" area. All the units are 2 beds with 1 bath and the previous owner has done some updates and over all the building is in very good condition. 2 of the 3 units are currently rented out at $675 each for a total of $2025 total income per month. The tenants are staying and i will take over their leases and security deposits. The asking price is $115K. Being an active realtor i have access to MLS and did my own comparative analysis and think the property is only worth about 80K to 85K at most. I know the owner is motivated and actually just purchased the property about 8 months ago for 74K, but did do some up grades and other work to it. It is also in an rough neighborhood which worrys me a little.

Is this a good investment? It seems like it at first appearance seeing how ill be making over 2K a month but do Multi family appreciate as much as a single family home would? Especially in that area?? Its basically turnkey...little to no work needs to be done with these units. If its such a good investment, why is the owner selling only after 8 months of owning it? (his realtor claims he got re-located to an area about an hour away...) Am i missing anything?

Any input is greatly appreciated!!!!

[Eric Black]

HI Aaron,

My first question is, is the property in an "up and coming" neighborhood or a rough neighborhood. You say it's in both. Haven't come across too many neighborhoods that are both.

Have you seen pictures of the property before the seller bought it? After realtor commissions and closing costs he's looking at a profit of around $30,000. He probably didn't put $30k into it but he may have. Sounds like he's trying to get the money he's put into it back plus a little profit.

Regardless, if you feel it's only worth $80-$85k then why are you considering paying $30k over what it's worth?

Two of the three units are rented which means the income is really $1350 per month. Has the third unit been vacant for the entire 8 months that he has owned it?

My recommendation would be to get the opinion of an unbiased 3rd party regarding the estimated value of the property. As far as his reason for moving that's not unreasonable. Some people don't want a rental property that's not in their own back yard. Try talking to the tenants if you go look at the property, see if they have had any issues or complaints.

Best of luck.