Buying or refinancing a 3‑family in Dartmouth can look straightforward until you dig into the details. Oil heat, winter services, water and sewer variations, and possible coastal insurance can swing your cash flow fast. If you want a clean, defensible pro forma, you need a local, step‑by‑step approach. In this guide, you’ll learn how to normalize rents, budget realistic expenses, plan capital work, choose financing assumptions, and test your numbers before you write an offer. Let’s dive in.
Know Dartmouth demand
Dartmouth sits between major SouthCoast employment hubs and a growing university. That mix creates steady rental demand across different tenant types. Keep these drivers in mind as you price rents and set vacancy.
UMass Dartmouth proximity
North Dartmouth is home to UMass Dartmouth, which supports student and staff rentals. Units near campus can fetch solid market rents but may see higher turnover. Normalize your rent roll to reflect furnished vs. unfurnished units, tighter leasing seasons, and conservative vacancy.
Commuter and coastal pull
Access to New Bedford, Fall River, and Route 195 supports year‑round workforce demand. Coastal areas and villages like Padanaram may face insurance or flood considerations and, in some pockets, seasonal patterns. If a property is near the coast or a river, verify the FEMA flood zone early using the FEMA Flood Map Service Center.
Step 1: Gather documents
You need full visibility to build a credible model. Ask for:
- Rent roll with lease terms, deposits, and concessions
- 12–24 months of operating statements and bank statements
- Copies of utility bills, tax bills, insurance, snow, landscaping, and trash invoices
- All tenant leases and move‑in condition reports
- Municipal records: assessor card, water/sewer account history, certificate of occupancy
- Recent capital invoices: roof, chimneys, boilers, windows, septic/well reports
- Utility meter layout for electric, gas, water, and heat
- Any zoning or occupancy constraints from the Town
Step 2: Normalize the rent roll
Your goal is a stabilized Effective Gross Income (EGI) you can defend.
- Confirm “lease vs. actual.” Use current lease amounts and flag month‑to‑month tenants.
- Benchmark market rents for each unit type in Dartmouth and adjacent towns. For student‑heavy buildings, compare furnished and unfurnished options.
- Remove one‑time concessions from ongoing income.
- Add recurring other income only (laundry, parking, storage, pet fees).
- Apply vacancy and collection loss that fits the tenant mix. A conservative range is 3–10%. Use the higher end for student rentals or older product.
Formula: EGI = Normalized Gross Scheduled Rent + Normalized Other Income − Vacancy & Collection Loss.
Step 3: Model expenses with local nuance
Start with the seller’s trailing‑12, then adjust to a realistic operating budget. Small multifamily expense ratios commonly land around 30–50% of EGI, trending higher for older buildings and high‑turnover properties.
- Property taxes. Pull the latest tax bill and assessed value from the Town of Dartmouth Assessor. If a revaluation or sale occurred, model a potential tax change.
- Insurance. If the property is near the coast or in a special flood hazard area, premiums can increase. Verify flood zone on FEMA maps and quote wind/flood coverage.
- Water and sewer. Parts of Dartmouth run on municipal water/sewer with base charges plus usage; other areas use private well and septic. Confirm meter setup and who pays each utility.
- Heat and hot water. Many Dartmouth triplexes use oil or propane. Fuel volatility is real, so be conservative and confirm who pays. If the owner pays heat/hot water, consider a cost‑recovery plan at renewal.
- Winter services. Budget snow plowing, shoveling, sanding, and salt. Contract pricing is common; long driveways or large sidewalk areas cost more.
- Trash and recycling. Confirm whether there is municipal pickup or a private hauler.
- Repairs and maintenance. For older New England triplexes, lean toward the upper end of typical ranges, about $700–1,800 per unit per year.
- Property management. Even if you self‑manage, include a market‑rate fee, often 6–10% of collected rents for full service.
- Capital reserves. Do not bury CapEx in repairs. Carry a separate reserve line; see Step 4.
Step 4: Plan CapEx and reserves
Separate recurring operating expenses from long‑life capital items.
- Inventory big‑ticket systems: roof, boilers, tanks, water heaters, windows, siding, porches, foundation, electrical, plumbing, and any septic/well equipment.
- Estimate remaining life and replacement cost. For older Dartmouth triplexes, budget reserves at roughly $500–800 per unit per year until you complete a physical condition assessment.
- If the property has a septic system, include a line for pumping and a contingency for replacement. Typical replacement can be around $10,000 to $40,000+ depending on design.
- Include immediate year‑0 CapEx for any deferred items the seller did not address.
Step 5: Set financing assumptions
Pick a financing path that fits your plan and model it with sensible cushions.
- Conventional portfolio loans. Local banks often lend at 65–80% LTV for investment 3‑families. Terms vary with credit, experience, and property condition.
- Owner‑occupant options. FHA can finance up to 4 units for owner‑occupants, subject to current guidelines. Owner‑occupied loans may offer lower down payments.
- Agency or small commercial loans. Explore Fannie Mae/Freddie Mac small products and bank commercial loans as appropriate.
Underwrite with:
- LTV: 65–80% baseline
- DSCR: 1.20–1.30 typical for investment property underwriting
- Amortization: 25–30 years
- Rate sensitivity: test at least +1% and +3% above your base rate
- Include points, legal, escrows, and any repair holdbacks
Lenders will look for market rent support, operating history, property condition details, and, for student rentals, potentially stronger vacancy assumptions or guarantors.
Step 6: Calculate value and returns
Focus on clean, comparable metrics and show your work.
- Net Operating Income (NOI) = EGI − Operating Expenses
- Cap Rate = NOI ÷ Purchase Price
- Cash‑on‑Cash = Annual Before‑Tax Cash Flow ÷ Equity Invested
- DSCR = NOI ÷ Annual Debt Service
- Debt Yield = NOI ÷ Loan Amount
- LTV = Loan Amount ÷ Purchase Price
Build a baseline year‑1 pro forma with EGI, line‑item operating expenses, NOI, annual debt service, and before‑tax cash flow. If the price implies a cap rate that is out of step with recent SouthCoast trades for similar condition and utility setup, revisit your rent or expense assumptions before you renegotiate price.
Step 7: Run sensitivity tests
Small changes can move cash flow quickly on a triplex. Test the scenarios you are most likely to encounter in Dartmouth.
- Vacancy. Shift your baseline by 2–6 percentage points and measure the EGI and DSCR impact.
- Rent growth or decline. Test −5%, 0%, +3%, and +6% year over year.
- Rate shock. Increase the interest rate by +1% and +3% to see the DSCR and cash flow hit.
- Expense shock. Add 10–25% to heating fuel, utilities, and snow removal to capture winter risk.
- CapEx surprise. Model a one‑time $10,000–$40,000 event in year 1 for a boiler, septic, or roof section.
Track how each case affects NOI, DSCR, cash‑on‑cash, debt yield, and the breakeven rent or occupancy you need to stay above your lender’s covenant.
Dartmouth‑specific checks before LOI
Use this quick list to avoid costly misses.
- Taxes. Confirm assessed value and current tax bill with the Town’s Assessor.
- Water/sewer. Verify if the property is on municipal service or private well/septic. Check meter configuration and who pays.
- Heat. Identify fuel type and who pays for heat and hot water. Collect 12 months of fuel bills if owner‑paid.
- Winter services. Ask for plowing/shoveling contracts and include salt/ice control.
- Insurance. Pull quotes early if near the coast or a flood zone. Verify FEMA classification.
- Occupancy and zoning. Confirm legal unit count and any registration or certificate requirements with Town departments.
Common red flags
Watch for signals that your pro forma is too optimistic.
- DSCR falls below 1.20 at your base rate. You may need more equity or a lower price.
- Expense ratio exceeds 50% without a clear reason. Investigate owner‑paid utilities or deferred maintenance.
- Imminent CapEx not in seller docs. Roof age, boilers at end of life, or septic issues warrant holdbacks or price adjustments.
- Flood insurance required but not modeled. Confirm FEMA zone and quote premiums.
- Owner pays heat for multiple units with no reimbursement. Consider lease changes or separate metering if feasible.
Quick workflow you can reuse
Collect the full rent roll, T‑12, leases, and municipal docs.
Normalize rents and other income, then apply vacancy and collection loss.
Build a local expense budget with taxes, insurance, utilities, winter services, maintenance, management, and reserves.
Separate CapEx from operating expenses and set per‑unit reserves.
Layer in financing with DSCR, LTV, amortization, and rate cushions.
Calculate NOI, cap rate, DSCR, and cash‑on‑cash for year 1.
Run sensitivity cases and set decision thresholds before you offer.
Local resources to verify numbers
When you need to confirm specifics for a property, go straight to the source:
- Town of Dartmouth website and Assessor for tax and property records
- Town DPW or water district for water/sewer status and billing
- FEMA Flood Map Service Center for flood zone verification
- Utility providers for service type and historical usage
- Lender program pages and loan officers for current LTV, DSCR, and amortization standards
Ready to evaluate a Dartmouth triplex?
If you want a second set of eyes on your underwriting, or you need help reconciling student demand, winter costs, or septic considerations, you’re not alone. As a hands‑on owner‑operator and multifamily broker on the SouthCoast, I can help you build a defensible model, source local quotes, and craft a negotiation plan aligned with your returns. Book an Appointment with Zach Midwood to move from analysis to action.
FAQs
What vacancy rate should I use for a Dartmouth 3‑family?
- Many investors underwrite 3–10% depending on tenant mix; lean higher for student‑heavy or older buildings where turnover is common.
How do I budget oil or propane heat for underwriting?
- Confirm who pays, collect the last 12 months of fuel bills if owner‑paid, and add a conservative cushion given fuel price volatility.
How do student rentals near UMass Dartmouth affect my pro forma?
- Normalize for furnished vs. unfurnished rents, shorter leasing cycles, and higher turnover costs, and use a vacancy assumption at the higher end of the range.
Does a septic system change my operating budget?
- Yes; include routine pumping and a reserve for potential replacement that can run about $10,000 to $40,000+ depending on the system.
What DSCR will lenders expect on a 3‑family investment loan?
- A common target is 1.20–1.30 based on the lender and program; model interest rate shocks to ensure you stay above the covenant.
How do I check flood risk for a Dartmouth property?
- Look up the address on the FEMA Flood Map Service Center and get insurance quotes early if it is in a special flood hazard area.
