Triplex, 100% Rented, Good Condition, Positive Cash Flow

[Chana O'Leary]

Hello all,

I've been a BP "lurker" for several months, but now have some money to invest and would like some expert feedback.

I am looking at a triplex in a good neighborhood, in a small "artsy" town in central New York. Rents and median incomes tend to be higher here. The triplex is in excellent condition, no rehab necessary and is priced at $69,000. It is 2,289 sf with three units - a 2 BR, and two 1 BR. The house is an older home built in 1880, but it has been maintained well. The tenants pay $800.00, $700.00 and $650.00. Landlord covers utilities. According to the BP Rental Calculator, allowing for 10% maintenance and vacancy - it should generate approximately $450.00 positive cash flow.

My issue is the HM it will take to get this property. My lender requires 35% down, 3 pts, and $1,495 loan fees with (ouch) 17.99% interest. They have a couple of different programs - one is a 10/3 program and the other is a 5 year fully amortized loan that effectively will wipe out most of the positive cash flow for those 5 years. So - do I take the risk of the balloon payment after 3 years (I have to confess I am not comfortable with a balloon lurking on the horizon given how markets can change on a dime these days (or so it seems)). Or does fully amortizing the mortgage and eating the cash flow now for future cash flow make more sense. I am working on restoring my credit after a divorce - but it is sufficient for these folks to loan to me. I have a great monthly income and can easily cover the 5 year amortized payments - but, would be retiring at the end of that period anyway.

I hope I have explained this clearly - but please let me know if I haven't - and which route you would take in these circumstances.

Thanks very much in advance.