Hi all, I wanted to get some imput about this deal which I have under contract. I've been going back and forth about whether to walk away over the last couple days and would like some unbiased feedback from this community to help me evaluate the decision. Talking to family and friends hasn't really given me much clarity.
Location CT - for context we have a dramatic inventory shortage here and our market is one of the hottest in the country. Everything sells immediately way over asking and I've put in 10 offers over asking price before this one was accepted.
The property is a triplex, which is what i had been ideally looking for. List price was $400k, and i offered 465k given the state of the market. After the inspection report came back, sellers agreed to lower the price to 430k, which for the square footage and rapidly appreciating prices is actually good in our market.
The property is currently bringing in 4050 per month in gross rent, which will be going up to 4350 once I move in and rent my current unit and slightly increase rent on one below market unit. My total PITI will be 3211 a month. Its also in the perfect location that I want to be in, with a 15 min commute to work and literally walking distance to my girlfriend's house. I currently live about 45 minutes away from both and do need to move closer.
Now to the negatives - the inspection report revealed that the front deck is not structurally sound and needs to be rebuilt. Got an estimate which ranged from 25-35k to rebuild it depending on materials and how it would be done.
The property also has active knob and tube electrical. Wiring for the kitchens was updated but the bedrooms and living rooms clearly were not. I havent gotten an estimate to replace all of it but my guess is it could be at least 30k given the size of the property and the plaster walls. This scares me due to potential insurance issues and fire hazard risk. Ive heard a potential cheaper solution is to just put in gfci receptacles on the outlets which are connected to the k&t. But this still doesnt solve the problem that the living rooms and bedrooms have only one outlet and id need to add more.
The 3rd floor furnace is also not currently working and could cost another 10k to replace.
The windows are all original single pane and need to be replaced eventually, easily another 30k.
I will need to evict a tenant to move in, and have heard that this tenant has been problematic. The inspection and appraisal had to be on the same day because this tenant refused to cooperate and allow for entry to the unit on different days. I fear they may trash the place or just refuse to leave when i try to evict them because there are no security deposits.
Im so conflicted because my plan has been to get a triplex and retire early on the rents from day 1 and securing this asset would be what i need to do to realize that goal. Its also in the perfect location and I'd be buying it to move first and as an investment second. Its also taken so much time and energy to get an offer accepted in our crazy market here in CT, and walking away means ill have to do this process all over again in a few months when im ready to try again. Over the long term in 10-20-30 years I feel like it would be worth it despite all the problems.
But after running the numbers about what my actual ROI will be factoring in all the expensive repairs and maintenance potentially costing over 100k easily, the odds are very high id be better off long term just investing in the stock market instead. I also already own a duplex and while it is annoying to drive far and to rely on staying with my girlfriend and grandma a few days a week to be closer to my job, I do not imminently need to move given that I have my current place.
The final piece to this equation is that id have to do the repairs slowly if i go through with this since ill only have around 30k cash left after closing, which is my emergency fund. Its going to probably take me 3-4 years of putting all the gross cash flow plus my salary into it to fix everything before I can start aggressively paying down the mortgage.
The main question is whether its worth dealing with the stress and expense of managing a massive project in fixing this place over the next 4 years to then have an asset that will be paying me for the rest of my life. Id love to hear what any of you would do in my position. Thanks.
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source https://www.reddit.com/r/RealEstate/comments/1tgtask/deal_under_contract_struggling_with_decision_post/
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