EP 2: Running The Numbers On Our New Multifamily BRRRR Investment Property!

## Transforming a Vintage Triplex into a Modern Gem: A Guide to Renovations and Financial Gains ### The Allure of Vintage Properties When it comes to real estate investing, few opportunities are as enticing as transforming a vintage triplex into a modern, lucrative property. The story of "Big Green," a 1925 triplex, is a perfect example of how careful planning, strategic renovations, and smart financial decisions can turn an outdated property into a goldmine. ### Understanding the Initial Investment Purchased for $330,000 with a cash-back deal to cover renovation costs, "Big Green" presented a unique opportunity. With only a 3.5% down payment due to owner-occupant financing, the initial outlay was just $8,750. This strategy, often referred to as "house hacking," offers numerous benefits, including lower down payments, reduced insurance rates, and the chance to live in the property while it appreciates in value. ### The Renovation Plan Renovating a triplex is no small task, but with a clear plan, it can be highly rewarding. Here’s a breakdown of the key areas to focus on: #### Unit Updates - **Floors and Paint**: Replace old floors with luxury vinyl plank and give the walls a fresh coat of paint. - **Kitchens**: Update cabinets, countertops, and appliances. For example, painting existing cabinets, switching to granite countertops, and installing a new dishwasher and sink. - **Bathrooms**: Remove outdated wallpaper, paint the walls, build custom wood vanities, and lay new tile flooring. Keep the tub but update the fixtures. - **Heating and Cooling**: Replace baseboard heat and window AC units with central air conditioning. #### Additional Improvements - **Electrical**: Update old knob-and-tube wiring and install new panel boxes. - **Plumbing**: Address minor plumbing issues and relocate the water heater for better space utilization. - **Garage Bays**: Utilize the five garage bays to generate additional rental income. ### Financial Analysis The financial aspect of renovating a triplex is crucial. Here’s how the numbers can add up: #### Current State - Gross rents from the three units and two garage bays: $2,550 - Fixed operating costs (principal, interest, PMI, insurance, taxes): $2,675 - Net result: A monthly deficit of $125 plus utilities #### Peak Performance - After renovations, gross rents increase to $4,775 - Total monthly expenses (including reserves and property management): $4,012 - Net result: A monthly cash flow of $763, translating to a 12% cash-on-cash return ### Actionable Insights for Investors 1. **Strategic Financing**: - Use owner-occupant financing to reduce down payments and lower insurance rates. - Negotiate cash-back deals to cover initial renovation costs. 2. **Renovation Priorities**: - Focus on high-impact areas like kitchens, bathrooms, and flooring. - Update electrical and plumbing systems to ensure safety and efficiency. 3. **Budgeting**: - Allocate a significant portion of the budget to the kitchen, as it is often the heart of the home. - Plan for contingencies and reserve funds for vacancies, repairs, and capital expenditures. 4. **Enhancing Value**: - Add central air conditioning and modern heating systems to increase comfort and appeal. - Utilize additional spaces like garage bays to generate extra income. ### Visual Appeal and Livability Renovations are not just about increasing rental income; they also enhance the livability and appeal of the property. - **Modern Aesthetics**: Use a cohesive color palette and materials like luxury vinyl plank and granite to create a modern, inviting space. - **Functional Layouts**: Open up kitchens and living areas to improve flow and make the space feel larger. - **Energy Efficiency**: Update heating and cooling systems to reduce utility costs and improve comfort. ### Conclusion Transforming a vintage triplex into a modern gem requires careful planning, strategic financing, and a keen eye for detail. By focusing on high-impact renovations, leveraging smart financing options, and managing expenses effectively, you can turn an outdated property into a lucrative investment. #### Call to Action - If you’re considering a similar project, start by assessing the property’s potential and creating a detailed renovation plan. - Subscribe to real estate investment channels for more insights and follow along on social media for updates on successful renovation projects. - Share your own renovation experiences and tips in the comments below. #RealEstateInvesting #HomeRenovation #TriplexTransformation #HouseHacking #PropertyInvestment #RenovationTips #FinancialGains #ModernizingVintageProperties Script: welcome back everybody in this episode, we're going to introduce you to Big, Green and lay out all the numbers mm-hmm, so the triplex was built in 1925 and we, purchased her for three hundred and, thirty thousand dollars with ten, thousand back and the reason we did the, cash back was because there's a lot of, renovations we have to do we wanted to, keep as much cash in our pocket as, possible and since this will be our, primary residence we are able to only, put down 3.5% which means we walked away, from the closing table only giving a, check for eight thousand seven hundred, and fifty dollars we love the house, hacking strategy we did it with our, first property and there are so many, benefits lower down payment, owner-occupant financing and lower, insurance rates and it's a really good, way to ease into investing mm-hmm I, always say it's investing with training, wheels we love it now - the units are, already occupied so we can't give you a, full tour of biggering but we can give, you a lay of the land and take you into, our unit first floor is a two-bedroom, one-bath apartment currently rented for, $1100 the unit is dated so after a, turnover and some renovations rent we'll, bring in around 1450 dollars second, floor is a two-bed one-bath apartment, currently rented for $1,000 an unit is, rather dated so once renovated we'll, rent for fourteen hundred and, twenty-five dollars the third floor is a, one-bedroom one-bath unit and you, guessed it also dated and is currently, vacant this is the unit we'll be living, in and once we move out going rent will, be around eleven hundred and fifty, dollars now if three units weren't, enough this property also has five, garage bays which can bring in a, combined rent of over seven hundred and, fifty dollars for those counting that's, four thousand seven hundred and seventy, five dollars in gross rent once Big, Green is fully up to speed to get there, though this house requires a decent, amount of renovations which includes, updating each unit with new floors, kitchens and baths extra keating old, knob-and-tube and running onlywire, throughout the house updating the panel, boxes some minor plumbing installing 4c, and central air in the third floor unit, and enlarging the driveway our total, renovation budget is $65,000 we're gonna, run all the numbers but first let's take, you inside unit number three give you, the lowdown and share with you our, renovation plans, now after coming up the stairs you make, a left into the living and dining area, we'll be replacing the floors with a, luxury vinyl plank doing a fresh coat of, paint and replacing the baseboard heat, and window AC unit with four ste and, central air off the living room and, dining room areas the kitchen majority, the budget is actually happening in here, well plan on keeping these cabinets and, painting them switching out the, countertop to granite installing a, dishwasher and doing a new sink and, faucet the kitchen will extend back here, we'll replace the gas range with a, smaller unit and reposition the fridge, next to it we're doing away with the, slop sink and relocating the washer, well this water heater is in good, condition it's in the worst area so, we're switching it out with an electric, lowboy version so we can max my space, and tuck it out of sight in the corner, we'll pull up the sheet vinyl and, continue the luxury vinyl plank in here, as well off the kitchen is the bathroom, the game plan in here is remove the, wallpaper and do a new coat of paint, build a custom wood vanity replace the, toilet and lay new tile flooring for the, shower area we're keeping the wall tile, and we're glazing it keeping the tub and, updating the fixtures the bedroom is, actually a pretty decent size we'll, paint the walls lay carpet and remove, the baseboard heat and window unit this, room has a pretty large closet as well, and we'll add some organizers and try to, maximize the space that's it now let's, dive into the deal analysis we're gonna, run these numbers spray once while we, house back and once when we get this, property at the peak performance alright, so for the house hockey numbers using, the current rents four units one and two, and rents for three of the garage bays, we'll be using two of them gross rents, are twenty five hundred and fifty, dollars our total fixed operating costs, are principal and interest fourteen, hundred and fifteen dollars PMI $224, insurance one hundred and twenty dollars, taxes nine hundred and sixteen dollars, which is a grand total of two thousand, six hundred and seventy five dollars, with current rents at two thousand five, hundred and fifty dollars in expenses at, two thousand six hundred and seventy, five dollars we'll be living in a, brand-new fully updated apartment in our, favorite area of town for only one, hundred and twenty five dollars out of, pocket a month plus utilities all right, peak performance um, same numbers as before for principal and, interest PMI insurance and taxes, totaling two thousand six hundred and, seventy five dollars but now I'm also, going to add reserves twenty one percent, for vacancy repairs and capex which is, one thousand two dollars and seventy, five cents and seven percent for, property management even though we'll be, self managing which is three hundred and, thirty four dollars and twenty five, cents, bringing our total monthly expenses to, four thousand and twelve dollars total, Peak Performance rents of four thousand, seven hundred and seventy five dollars, minus total expenses of four thousand, twelve dollars equals seven hundred and, sixty three dollars in monthly cash flow, which is a twelve percent cash on cash, return in the next episode we're gonna, start tearing this place apart it's got, to get uglier before it gets prettier to, make sure you don't miss out be sure to, subscribe to this channel hit that like, button and follow us along on instagram, at rentals too well we'll see you guys, on the next one, [Music], you