5 Unit Purchase Decision - HELP!

[Jake Marin]

Having a hard time making a decision on this one...to purchase or not to purchase- that is the question.

Description of the property:

5 unit brick multi. Excellent location on a park in a downtown.

Asking price - $390K

Current Rents: $3675/month (could easily be brought up to $4875 with almost no investment)

Expenses	Monthly
Taxes	$ 663.25
Insurance	$ 208.33
Water	$ 291.67
Heat	$ -
Electric	$ -
Plowing/lawn	$ -
Trash	$ 100.00
Prop Management (10%)	$ 487.50
Repairs (5%)	$ 243.75
Vacancy (5%)	$ 243.75
CapEx (10%)	$ 487.50

TOTAL

$2,725.75

I'm optimistic that I can get the property for $300K. Needs $25K in rehab. High Capex due to the fact that there are several pending projects (3 old boilers will need to be replaced though currently functioning well). Half the roof needs replacement (why does anyone do half a roof???) Some brick work and basic carpentry. Much of that included in the $25K rehab but this is a 7,000ft2 OLD building. I'm sure there will be projects galore. Cap Rate 10.5% with upgraded rents. Sounds decent, right? But...

CoC is only $600/month. Pretty anemic for a 5 unit building. I'm also concerned that I won't be able to pull my money back out with a cash-out refi due to the fact that I'll have $325K (plus closing costs) into the building and my bank will only do a cash out refi for 70% of the value. That means it needs to appraise for over $450K. No way. OK to leave some money locked up but I would estimate that the appraisal wont come in over $375K from what I can determine. That locks up a bit more of my cash than I would like.

Thoughts? What would you do?

Jake