Analyzing Deal for New Investor

[Jesse S Kogelman]

Hello. I am a new member and am looking for advice regarding my first potential deal. I recently cold-called the owner of a 7 unit complex who is interested in selling their property near me in Northern Michigan. The owner recently had it appraised at $570,000. My commercial lender appraised it at $582,000. The bank will give me a loan amortized over 20 years with 5 year balloon at 4.9% with 20% down. I am assuming asking price of $570,000. I would put down $78,000 cash and take $36,000 of equity from my home for that down payment. The bank will roll the $36,000 into the loan.

The property was built in 2004. No vacancies over 1 month in past 9 years. Annual income is currently $78,300. Expenses (assuming 5% repairs, 5% vacancy, 7% capEx) are about $70,000. That gives me about 11.3% CoC ROI and cap rate of 8.3%. I have been looking for properties over the past 6-12 months and most cap rates in my area are less than 6% and CoC less than 8%.

I am looking for any advice regarding this deal. Does this seem like a good investment? Should I wait until I have more cash for the down payment (instead of using equity in my house)? Should I look for a different type of loan? I really apreciate any feedback. 

Thanks

Jesse