Deal analysis - 710k Triplex in Mid-City (LA)

[Fred Fleury]

Hello BiggerPockets members, 

 I live in LA and am looking locally at a growing neighborhood I'm familiar with called West Adams. I'm looking at multi-unit rental properties and trying to run numbers on them to get educated and see what's up. 

I thought I'd ask for input on this one if anyone could help out. It looks decent and with potential for appreciation with cosmetic repairs. 

Triplex (2/1, 1/1, 1/1)

Sold for: 720,000

Sqft: 1,964

Bangalow style units attached side by side 

(+) Actual income: 4,523.50    (property was sold with all 3 units occupied)

(-) Expenses

Property taxes........................800.00

Insurance.............................200.00

Repairs/maintenance...............200.00

Capex.................................100.00

Utilities..............................100.00

Vacancies............................200.00

Management.........................200.00

Total expense........................1,800

Income (NOI?) .....................2,723.00

Then

(+) Income (NOI?) .....................2,723.00
(-) Mortgage at 4.4% 25% DP.........2,704.00

Monthly cashflow.....................19.00 


So looking at this I'm thinking:

- Property seems to break even, but good potential for appreciation with TLC and considering the developing neighborhood

- For reference it doesn't meet the 1% rule, but gets 0.6%, which looks better than many properties in LA

- Large out of pocket for down payment, closing costs and rehab 

My context:

-I'm considering househacking for personal reasons such as: proximity to work, for getting started in rei, because I want to be hands-on in the process and be around the property (at least the first) to learn everything, not necessarily looking for cashflow

-If I moved in then of course the cashflow would become negative, but let's consider good odds of minimizing expenses and growing rents, and this negative cashflow does not exceed what I currently pay in rent

- In a market comparison of 30-40 properties this triplex seems to be a little slightly below market value

Conclusion: When it comes to cashflow and money down this doesn't seem like a good deal, but it looks like an interesting option to me personally. Again, this property is sold and not in the market, I'm just running scenarios to learn.  

So the way this could work is I'd have to commit that large amount out-of-pocket to be able to do this househack, hoping to be able to learn a lot, get appreciation and once that happens refinance the property and move on to a second one with lessons learned.

What do you think? What angles am I missing, is this realistic as far as the numbers go? Thanks in advance for any advice. 

Cheers

[Lee Ripma]

@Fred Fleury

You'd be thrilled to have a vacancy. I would suggest SFH for house hacking due to tenants rights in LA. No one should buy MF property in LA without understanding the City of LA RSO.