Looking for First Deal. Help with Analysis

[Jared W Smith]

Hello all-  In an effort to work toward comfortability in pulling the trigger on my first deal I am analyzing several local deal (in Westchester County, NY). 

I came across this 3-Family for $350k. Seems below the average for the area. This property needs some interior work to get it rent ready. So I am seeing if it can work out. I first ran the analysis at the listing price and doesn't look like a bad deal, but am I missing something? Seems a bit to good to be true. The high cash flow may be diminished by the age of the building and possibly more than expected repairs and replacements upfront and ongoing maintenance.    

Purchase Price: $350k

Downpayment: 20% = $69k

Closing cost: $6k

Renovation/Repair cost: $40k

Unit Make-up: 3 Units (each 2 bdrms, 1 bath) 

Rent: ~$1800-2000/unit (per rentometer) (Ran numbers based on $1800)

Neighborhood: C neighborhood (not ideal)

Built: 1901 (Most questionable part, many items may need replacement and extra maintenance annually) 

Thank you in advance. 

[Michael Lee]

Hello and welcome to this site Jared!  Always know the area of what you are bidding on.  Figuring a worst case scenario is a good way to look at your investments that should consider the worst case scenario as the worst case scenario of what it may look like if things go wrong.  Also, look at the best case scenario that assumes all goes well and helps you establish a price range.  A high-low price range would be developed to help you out.

When you are first starting out just figure any improvements will be the average. Do not cut any corners or try anything fancy until you gain some experience.  Just play it safe until then.  You did not mention the age of the property  you are looking at and that could make a difference if anything might need special care today like asbestos, lead paint, and the major draining system. 

Any of those things that exists or are  may have major costs associated with your improvements.  You might ask a local building inspector if there are any well-known problems with anything or any problems exist that you will have to deal with.  You did make a good appointment that can effect the cost related to the age of the building.

I just saw that the age of the building was included and I would see if there are any extra testing or repair costs associated with that age.  Knowing about any past items taken care of would be nice but there is a good chance to not now it all before buying.  Depending on your confidence of any problems may effect your final price and be a good reason to use a worst case scenario.  

"Taking Action" is an important item in being successful but do not try to do anything foolish to do that.  Good luck to you!