The property I'm looking to get involved in is a 6-bed tri-plex out in Phoenix. The property is listed for $305,000 but has been on the market for about a month and was originally listed at $335,000. The listing states the owners pay no utilities, the roof was replaced last year, there is a new water heater in one of the units, the AC was just replaced last summer(super important in AZ), and there are no HOA fees. Additionally, the property definitely has good forced appreciation potential.

I looked on Zillow.com and rents in the area are around $1,000 for similar properties. The MLS posting said property taxes for 2019 were $763(The analysis below uses $2K as I was just recently informed of the MLS tax info). I'm not sure what home insurance rates would be so I estimated $2,000 based on a BP post of someone inquiring for a 4-Unit in Scottsdale. In the post, they said a minimum of $1 million coverage was recommended for a 4-Unit. The poster had coverage for $300K @ $1K per month. An agent replied saying that they would triple the coverage to $1 million and it would be a minimal increase in price. I factored in 5% of rent a month for vacancy, 10% for repairs, and 11% for Cap EX. No HOA or utilities are paid for by the owner. Lastly, I did two analyses: one with property management(as Brandon says you don't want to manage forever) and one without(I am looking to gain experience); additionally, I did some best and worst-case scenarios to get a picture of the extremes and I believe this property looks very promising.

For my analyses, I created my own calculator on excel based on a template J. Scott put out. I made some modifications but I do know that the math is correct(triple checked)!

I assumed a $10K for immediate improvements, $5K for closing costs, and $1K for miscellaneous. I looked at the property with rents at $1K for each unit: one for prop management and one without. Then rents at $800 with prop management and one without. I'm assuming a conventional loan with 20% down over 30 years @ 4% and a purchase price of $300k. All cash flows are based on the expenses mentioned above. Thanks a bunch for reading!

P.S. I created an excel calculator because I really want to understand how the math behind the analysis works. I find this helps me get more comfortable and helps build some intuition in terms of being able to gauge the overall picture before doing a complete analysis on the property. Also, thank you to Melanie Johnston of Tru Realty for the help so far. She is a very friendly agent if anyone is looking in AZ!

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3-Unit Phoenix, AZ Property Analysis

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