Seeking Advice: pursuing my 1st Triplex in Tampa, fl

[Luis Pereiro]

Hello BP. I'm seeking advice on purchasing a Triplex. This is my first multifamily and having trouble figuring out what is my MAO. Owner says it is worth $150k but she will not provide an appraisal. Honestly, I think she is going off property appraiser which values it at $154k. I'm thinking I need to get closer to $100k though considering the amount of repairs.

Breakdown:

All units are rented but much below market value (they are rented to family & friends). There are no existing lease in place. So part of the purchase is that all tenants would need to move out by the time we close. They will have 2 months since I am using a 203k FHA loan. This fair?

Units are all similar. 1 bed and 1 bath 720sf

Loan Terms: 3.5% down, 4.97%, 30 year fixed (estimate PMI at $85/mth)

Fair Market Rent - $750 per unit (includes Water and also considering including TV)

Repair - $35-45k  - triplex needs a whole makeover, they were not maintained. The big items is adding parking spots. Currently parking on grass & gravel. Maybe 2 per unit. New roof and re-frame to install A/C and ducts. Using window units. Install electric meter to each individual unit. Currently only 1 electric meter. Fully remodel interior of 1 unit. New flooring in other 2. 

Utilities - seller will not provide me their utilities bills so I am estimating. The property is on septic, so I assume the water bill won't be over $100/mth

Taxes - currently at $3555, $296/mth. But this will go down next year once I apply for homestead

Home Insurance - $1398/yr

Flood Insurance - home is in a flood zone but the building is elevated. Insurance agent can't provide a quote till I get an elevation certificate. I am estimating $650/yr just to be safe

5% vacancy - $112

5% repairs - $112

Hope this helps. If I'm missing anything, please let me know. Thanks so much for your time and feedback.

[Edgar Rodriguez]

Hey Luis, 

Could you share the location of the deal as well as the total square footage?

Based on raw numbers(based off 150k loan), it looks like you're at or close to break-even accounting for vacancy and repairs with you occupying one unit. You'll essentially be living for free. After you move you will be cash flowing somewhere  around $700 per month. 

Depending on what your goal is, you could probably pay somewhere around 130 or so (with 45k in repairs) and cash flow between 400-500 per month after you move out, which would be a really good CoC return. Accounting for management, which you always want to factor in even if you self manage, you will be at around 300 a month or 3600 a year which is still solid for a $12,000 dollar investment if you factor in your closing costs.

I think this really depends on you and your goals and also the area. Is the area attractive to renters? Does this area have the kind of tenants you want to deal with? If the house is in Sulphur Springs, you can't really bank on appreciation. You always want to have multiple exit strategies.