Deal Analysis: Build a Triplex in Fresno from scratch

[Asim G.]

Hello,
I am looking for opportunities to invest in Real Estate in the Fresno area. I have an SFR and a 3'plex in the area that I bought in 2009 and 2011. SInce the market has changed and it is hard to find decent (b area) cash flowing properties, I am thinking of building small MF in the area. I just want to run some numbers in this forum and get some feedback to focus on due diligence to do.

Let us assume that I purchase this lot in Cash for $30,000

https://www.redfin.com/CA/Fresno/6979-N-Weber-Ave-...

And then build this triplex on the property

http://www.plansourceinc.com/J0605-14T.htm

Assuming cost to build of $75/sqft (including permits). The cost to build is $230,000. So the total cost to build/acquire the property is $260,000 (ignoring holding costs). I can collect money from my savings and family members to achieve this. Once complete, I plan to refi this 3'plex once the construction is complete.

Assuming each 900sqft 2/1 room will rent for $750/month. So the monthly rents will be $2250. Each property will have its own water meter, so the tenant is responsible for that.

So I end up acquiring a 260K triplex for $2250. Not a great deal by an means. But the property will be brand new with minimal maintenance costs for the first few years. 

Any thoughts on this plan. I am basing the $75/sqft building cost assumption on feedback from a realtor I have talked to. It seems a little low to me, and that is something I need to investigate. I am also not sure about the permit details, and the idea of having one water meter per dwelling.

I respect the opinion of folks on this forum, and would love to hear all feedback.

[Franklin Romine]

@Asim G.

Your scenario sounds possible.  A $30K lot is probably not in the best area in Fresno.  I would figure about $300K to build the 4plex.  The cost will go up because you will not be here to manage the build.

I like the idea of owning new construction. This is in my long term plan.  Since I started investing I have always looked to acquire property below replacement value.  One of my best rentals was built in 1915.  So for me the age of the property doesn't really matter.  Last week I evicted a tenant in a home that was built in 2005, the place is trashed.  For me the age of the property doesn't really matter.  You can put a new roof, plumbing, electrical into any property.  In the central valley we really do not have any harsh weather condition deteriorating the properties, except for sun.

This might not sound like a sound plan for everyone but I personally like sfr's, condos and duplexes.  I find it to be less headache dealing with tenants not getting along and tenants are staying longer. This week I closed escrow on a duplex in Visalia.  This brings me up to around 35 units.  Owning and managing this many properties can create some mayhem.  I'm going to stick it out to 100 properties then I will probably run away.

Frank