Investing in my First Multi Family Property

[Tim Nethers]

I've been throwing around the idea of investing in a multi-family property for a few years now, and I've been running the numbers on multiple properties. I've singled down on one that I think I would like to purchase but I wanted to get an idea from the greater audience on whether I missed anything. I put what I assumed were conservative numbers, but I believe the last rent ask was $575, but it rented the previous unit at $475

This is my first time trying to buy a MFP, much less in an out of state market, so I would love some eyes on it to see if my numbers are unrealistic.

Monthly Operating Income	2931 E 112th St
# of Units	3
Average Monthly Rent per Unit	475.00
Total Rental Income	1,425.00
% Vacancy and Credit Losses	8.30%
Total Vacancy Loss	118.28
Other Monthly Income (laundry, vending, parking, etc.)	-
Gross Monthly Operating Income	1,306.73
Monthly Operating Expenses
Property Management Fees	$142.50
Repairs and Maintenance	142.50
Real Estate Taxes	75.00
Rental Property Insurance	94.00
Homeowners/Property Association Fees
Replacement Reserve	130.00
Utilities	50.00
- Water and Sewer
- Gas and Electricity
- Garbage
- Cable, Phone, Internet
Pest Control	50.00
Accounting and Legal
Advertising
Monthly Operating Expenses	684.00
Net Operating Income (NOI)
Total Annual Operating Income	15,680.70
Total Annual Operating Expense	8,208.00
Annual Net Operating Income	7,472.70
Capitalization Rate and Valuation
Desired Capitalization Rate	7.50%
Property Valuation (Offer Price)	99,636.00
Actual Purchase Price	90,000.00
Actual Capitalization Rate	8.30%
Loan Information
Down Payment	25,000.00
Loan Amount	65,000.00
Acquisition Costs and Loan Fees	2,500.00
Length of Mortgage (years)	30
Annual Interest Rate	6.000%
Initial Investment	27,500.00
Monthly Mortgage Payment (PI)	389.71
Annual Interest	3,878.29
Annual Principal	798.21
Total Annual Debt Service	4,676.49
Cash Flow and ROI
Total Monthly Cash Flow (before taxes)	233.02
Total Annual Cash Flow (before taxes)	2,796.21
Cash on Cash Return (ROI)	10.17%

[Mike D'Arrigo]

@Tim Nethers I don't see where you've missed anything and your assumptions all seem reasonable. The biggest thing that jumps out at me is the price and the rent. $475/mth rent per unit is low for pretty much any market and is usually indicative of a rough neighborhood. The same can be said about the price. Even in the most affordable markets like the Quad Cities and Cleveland you can't find a MF for $100K unless it needs a lot of work or it is in a bad area. That price point and rent raise all kinds of red flags to me.