All Forum Posts by: Paul Lee

Yep!  That's the one.  We have our inspection next week.  The units need new carpets, paint, appliances--a ton of work.  But $900 for rent for a 600 sq. ft. apartment as-is...is still fairly cheap for the area.  When you say your "client was concerned with the structure itself", do you mean you had a foundation guy out there?  Or was the building too old for your client's tastes?

Thanks for your response and for digging into the numbers!  I don't find critical feedback discouraging at all--I appreciate the insight from the BP community. 

I did see that the cash-on-cash return is fairly low, but this will be a long-term buy-and-hold, so IRR would be a more accurate measure in my opinion. I believe I pay for water, but I have to double-check. Good point about the maintenance. Should I ballpark 15%-20%for repair, maintenance, and capex? The roof will be replaced by the seller prior to closing.

Hey BP members, 

I need a quick sanity check on the math here just to make sure I'm not biting off more than I can chew.  I'm currently under contract for a triplex, which I will be occupying one unit (2 BR, 1 BA) for a year before renting it out.  A little backstory on the property: It was built in 1880 and last sold in 2004.  The seller has not changed rent prices for years, resulting in the previous tenants staying for more than 5+ years and paying way below market rents.  Based on my research of Craigslist, Rentometer, and Padmapper, 1 BR / 1 BAs go for $1,100 - $1,500 and 2 BR / 1 BAs go for $1,400 - $1,900.  A current tenant on a month-to-month lease pays $900 for the 1 BR / 1 BA.

**The following analysis assumes that I move out and have all units being rented out.

Denver, CO (Baker) Triplex

List price: $620,000

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INITIAL INVESTMENT: $129,780

ANNUAL PRE-TAX CASH FLOW: $7,100

CAP RATE: 5.13%

CASH-ON-CASH RETURN: 5.47%

IRR: 12.85% per year (30-year hold assumption, 3% increases in rents / expenses)

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INCOME**

Gross Rental Income UNIT 1 (1 BR / 1 BA): $1,150

Gross Rental Income UNIT 2 (1 BR / 1 BA): $1,150

Gross Rental Income UNIT 3 (2 BR / 1 BA): $1,600

Vacancy (6%): $234

TOTAL INCOME: $3,666

EXPENSES

Prop tax: $517 ($6,204 annual)

Insurance: $110

Maintenance & Repairs (10%): $390

TOTAL EXPENSES: $1,017

NET OPERATING INCOME (NOI): $4,683

DEBT SERVICE

Loan Payment: $2,058

TOTAL DEBT SERVICE: $2,058

MONTHLY CASH FLOW: $591.47

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Am I missing anything for my analysis?  I know some people factor in property managers in their analysis.

I'm considering purchasing a triplex and living in one unit, but based on my research it seems you need to come up with a 25% down payment per Fannie Mae guidelines?  Is this correct?  I have also seen that for pure triplex investment properties (non-owner occupied) you need a 25% down payment as well.

Assuming I was putting 13% down for the property, I would be able to service the loan purely with my W2 income and no rental tenant income. 

Given the growing population shift to suburban America fueled by coronavirus, work-from-home, and other factors, I'm curious how this may (or may not) have impacted your views on urban rental properties. Obviously, if you price your rentals below whatever market is, you're going to have renters...but with that considered, would you still think buying a rental property near downtown is still a good purchase?

I am in the process of buying a triplex located in my downtown area with the intention of house hacking, but I am having second thoughts given the current environment. Any thoughts or insights would be much appreciated. Thanks!

@Brandon Plombon that makes sense. Someone else replied the following "Doing a FHA BRRRR deal is hard because FHA requires the home to in acceptable condition for someone to live in, and BRRRR deals basically demand the home to have a lot of room to create sweat equity, meaning the home is usually distressed in many ways, which often makes the home not qualify for a FHA loan.

So you would need a home that is distressed enough that you can add value to it that makes sense as an investment, but also in good enough condition that you can live in it. I’m sure these exist, but it may take a long time and a lot of effort to find such a deal."

Longtime lurker here. I love Bigger Pockets for teaching me a lot of things real estate investing related.

We are in a fortunate position to have a sizable down payment for our potential forever home. However, we also want to start our real estate investing journey. Curious to hear thoughts (criticism welcome as well) on doing the following:

• Use an FHA loan with 3% down to purchase our first home
• BRRRR the first home
• Then use a conventional loan with 10% down to purchase our second forever home

Assuming my job is stable and we purchase within our means, is there anything preventing this? Or anything I should be aware of?  I think this would be a great way to get my feet wet with real estate.

The number of typos in your post (@Chris Gawlik) makes you lose all credibility.