Considering first multi-family property. HELP!

[Jose Centeno]

I will try my very best to keep this as short as possible. Even if you don’t give me a detailed response I would appreciate a simple” you are way off,” or just let me know if I’m on the right track:

I am looking for my first investment property and have been researching, reading, watching videos, listening to podcasts....you name it. I feel like I am doubting myself (which I know is pretty common for a beginner). I’m constantly reading that people can’t seem to find multi-family homes that cash flow and provide a good return, but when I crunch the numbers on some properties I’ve run across I feel like they are good deals. So what am I doing wrong? Below is an example of one I am taking a look at tomorrow in Connecticut. Let’s just assume I pay asking price. I’ve spoken briefly with the owner (selling privately) and he and his wife have owned the place for 20 years and are looking into other business ventures. The property is fully occupied and the tenants have been in place 1 year 8 months, 2 years 8 months, 3 years 2 months, and 10 years 1 month. The property looks to be in pretty good shape and updated.

Legal 4-Family

Asking Price: $410,000

20% Down Payment: $82,000

GROSS INCOME

2-Bedroom: $1,350

3-Bedroom: $1,200

3-Bedroom: $1,250

4-Bedroom: $1,450

Total: $5,250

OPERATING EXPENSES

PITI @ 4.35%: $1,632.82

Taxes: $483.66 ($5,804 yearly)

Home Insurance: $243.75 ($2,925 yearly)

Sewer Bill: $66 ($792 yearly)

Water Bill: $107 (average)

Lawn & Plowing: $100 (pays a tenant)

5% Maintenance and Repairs: $262.50

5% Vacancy: $262.50

10% Property Management: $525

Total: $3,420.73

NET INCOME (monthly):

$1,566.77

NET INCOME (yearly):

$18,801.24

Cash-on-Cash Return is tricky because I’m not sure what my closing costs will be but let’s assume I am all in for $90K.

$18,801.24/$90,000 = 20.89%

I prefer you be harsh and tell me I’m a fool for committing $90k to this, if that’s the case. Or that maybe I should start smaller.

I've also been researching my loan options and apparently 15% down payment is possible which would make my COC return even better.

So maintenance and repairs too low? Vacancy too low?

I welcome any and all comments. Thank you. 

[Marcus House]

That is an important fact. On the surface looks good. Likes like even if two units go empty the numbers cover most. My number are coming up with a little over $400/door in net profit. Is it listed? Will he do owner financing. Has he every tried to listed it previously. What did buy it for. All irrelevant given the NOI I think but why so low. I did not reference my underwriting chart to see what you may be missing from your monthly cost. Maybe others can chime in. It is late and I'm going to be now.