Good Deal or Bad Deal: Triplex Deal with Cashflow, no Equity

[Andrew Adamany]

Hello Everyone, I need some help in analyzing a current Rental Property Deal and wondering what you would do with this sort of deal.  It's a triplex with built in tenants that want to stay.  It needs updating, but repairs may not need to happen until units become vacant.  It'll bring monthly cashflow and acceptable Cash on Cash return, especially if repairs aren't up front, but the wholesaler's asking price, as-is, is higher than my projected fair market value after repairs.  There's a lot of tradeoffs to consider:

Triplex in Murfreesboro, TN through a wholesaler.  Built in 1915, Currently unknown how long ago since it's last renovation

Each unit is 1 bed/ 1 bath. 2,440 sq. ft.

Asking Price: $160,000

Repairs: $25,000

Gross Rents: $1,950 (23,400 annual)

Estimated Monthly Cashflow : $580

20% Downpayment: $32,000

Cash on Cash ROI with upfront repairs: 11.5%

with few/ no upfront repairs: 15+%

built in 1915, must have been renovated but I don't know when at this time.

Gross Rent cut in half divided by 10% puts the Fair Market Value estimate at $117,000

The Comps are kind of sporadic:

Triplex (built 1900)- Under Contract- 3,100 sq ft- 1 unit is 2bed/1 bath - $128,000 as is 

Quadriplex (built 1900)- Under Contract- 3,863 sq ft- "?" beds/1 bath per unit- $310,000  renovated

Duplex (built 1996)- Sold- 1,728 sq ft- 2 bed/1 bath per unit- $170,000 renovated

My Realtor's opinion:  The $160,000 is high but thinks it's still a good deal given the cash on cash return and circumstances.

My Dad's opinion:  The purchase price should be $100,000 or below, given the repairs needed to update the property, and the lack of equity is crucial

Me:  I like this deal based on the cashflow, built in tenants, not needing to conduct repairs upfront, which allows me to set those costs aside through my Cap X fund.  But the price under contract mixed with the sporadic comps has me bothered.  I don't know what the realistic value of the property is based off these comps, if the comps really even matter if I plan to hold this property long term, or if I can get this wholesaler to renegotiate the price before I bring in an inspector.  That's what holding me back.

What are your thoughts? Is the cashflow, Cash on Cash ROI, and built in tenants enough for you to give up the equity? Or do you need the equity, and if so, what would you determine the ARV as, and how much built in equity would you find acceptable to do this deal?

I appreciate all the insight!

analysis pdf: https://www.biggerpockets.com/calculators/shared/6...

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