How does my analysis look?

[Steven Dreyer]

I'm still a newbie and want to see if my analysis is correct before I move forward so any help is greatly appreciated! It is a nice triplex in a decent area and hopefully will be my first deal!

Asking Price: $65,000

Down Payment (20%): $13,000

Closing Costs (2%): $1,950

Finance/Interest/Term: $52,000/5%/30 yrs

Mortgage: $276

Rent: $1650

Vacancy (10%): $165

Operating Expenses (50% Rule): $825

Cash Flow: $381

Cap Rate: 12.2%

ROI: 8.8%

Rent to Value: 2.5%

So as of right now I think it's a pretty good deal. I intend on having a PM manage the property which I assume 12% in the operating expenses. The rents for a place like this are also low. Comparable properties in the area may get $650 a door for a similar size and roomed property. Any input will be greatly appreciated!

[Ben Wilkins]

@Steven Dreyer - using the 50% rule is good for initial analysis, but you need to do a deeper evaluation in order to really determine if this is a good deal or not.

For example, a triplex can go either way for utilities - what is the tenant responsible for, and what does the landlord pay? Water and Sewer aren't always split, so you may have to pay for those - do you know what the annual amount is?

As a heads-up, closing costs will probably be closer to $10k if you include 1 year of insurance and taxes for escrow.

I ran an evaluation assuming some standard numbers for utilities, and it's still not a bad deal.

With $1500 property insurance, $3000 utilities, and $3000 property taxes, I'm estimating a cash flow of $274 per month. Cash needed at closing is $23k.

Overall, you could do worse for an investment. You did a good initial analysis, but make sure you use some real numbers to dig deeper rather than using just the 50% rule!