Tri-Plex Analyzation Needed

[Trevor Miller]

This is my 3rd post on BP and I'm already loving the support everyone provides.  I just sold my rental of 5-years and need to 1031 exchange into a new property ASAP.

I've dove into a couple of opportunities now and have learned a lot on how to analyze deals and look closely at cash flow.  

My latest find is a Tri-Plex built in 1979 that is currently fully occupied.  The property is located right next to a community college that attracts more 25-35 yr olds as opposed to the local party college.  I'll post my calculations below and will include notes/questions below:

PURCHASE PRICE $199,000
CLOSING COST $2,985
CASH TO CLOSE $50,496
LOAN AMOUNT $151,489
REHAB $5,000

MONTHLY RENT $3,090

EXPENSES:
MORTGAGE $836
INSURANCE $125
PROP TAX $453
PROP MANAGER (10%) $309
VACANCY (10%) $309
REPAIRS (5%) $155
MAINTENANCE $50
HOA $0
TOTAL EXPENSE $2,237

CASH FLOW / mo $854

50% Rule...$400

I build in Prop Management just to be conservative but I'm going to manage the property until I get to the 5 property mark.

Now the bad/unknown.

• Each unit has an individual furnace but they are all 25 yrs old.
• The exterior stucco needs patching & painting.
• The roof is stated to be in good condition, but I think its got to be 15 yrs old.
• I'm trying to research how this property might appreciate in value over the years.  At the very least, the cash coming in will get me started to stash money away for the next property.

1. Does this look like a good deal?

2. If I do end up putting a roof, furnaces and new paint will this increase the value enough for me to do a cash-out ReFi?

Thank you,

Trevor

[Justin Carmack]

You have multiple old furnaces that need replaced.  Personally I would allot the money to swap those furnaces immediately so I could avoid the headache of dealing with a down furnace a/c unit in the middle of a snow storm. 

I recommend adding an expense for capital expenditures in your estimates until you get a reserve set aside.

The real questions are... how much money do you want to cashflow? Are you happy with the cash-on-cash return? 

We all know what opinions are like, but when I'm buying I look to cashflow $200 per door after expenses.  $250 per door I would be thrilled.

Is the 1031 covering all of your down payment?