Wondering if I am doing the right thing?

[Paul Kuhn]

I am looking at purchasing a 8unit apartment in Olde Towne Portsmouth, VA, which is in a flood zone... Wondering if I am doing the right thing in purchasing this.

The economy has several anchor points, the military, a naval hospital within walking distance, ship yards, ports, tourism "Virginia beach".

These are the financials.

$74,100 current rental income.

$1,800 Laundry (old top load COIN (0.75c) washer/dryer, I believe this can be improved, with new card machines)

Expenses

Bldg Insurance        2976

Flood Insurance      2690 (hoping this doesn't increase...)

RE Tax                    6297

Electricity                720 (decrease through more efficient lights/washer/dryer)

Natural Gas            1200 (2 tankless water heaters, decrease through showerhead)

Water/Sewage/Trash  4380 (don't know exactly how much for water, though trash is $33/unit, hoping to add water saving aerotors/showerhead/toilet to all units, maybe submetering)

Lawn Care               540   (Will eliminate this due to me living on site)

7% - Vacancy               5187 (little turn over)

7% - Management        4824

6% - Maintenance        4446

Actual Income $75,900

Expenses        $33,260

Net Income      $42,640

P&I                   $29,568

P&I 2nd              $9,278

End Cash Flow $3,794

75% loan 5.25% fixed/amortized 5/25

Seller financing 40k 6% over 5years 

So my question is, will this deal work? It is positive in cash flow, but will Flood insurance make this not work, or even mean financial ruin? The city is trying to prevent flooding of olde towne, but not doing a very good job at it... The Base Flood Elevation is 7.6 Feet. The mechanicals are off the ground by 22inches, the lowest elevation of finished ground is 3.8 feet. So if there is a high flood, then the mechanicals will be damaged.

The good thing, is the "Top of the next floor" is 8.2 feet, or the first floor.

What are your thoughts? Also for trash, does anyone know if it is possible as a commercial apartment building to get rid of city trash and go to waste management?