Is this a DEAL?

[Jonny Lambert]

I am looking to purchase at least two cash flowing rentals for long term holding by June of this year. However, I live abroad and thus have no 'local' market or team in place. This has led me to turn key investments. I ran across this one and wanted to know what the BP community thinks about it as an exercise for being able to analyze 'deals' like this moving forward.

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A triplex property in Philadelphia

Purchase price: $127,500 (not a foreclosure, normal sale)

Property info: 3 bedroom, 3 bathroom, 2,2790 square feet (3 floors, triplex)

INCOME

Monthly rent collected: $1,950

Guaranteed for year 1. One year home warranty (could someone explain what that might mean?). A 15 year roof warranty.

EXPENSES

Monthly expenses

Property taxes: $105

Insurance: $80

Property management fees: $195

Monthly expenses (conservatively estimated)

Vacancy (7%): $137

Repairs (5%): $98

Total Monthly Expenses- $614

Net Income = Income – Expenses = $1336

This makes the cap rate a stunning 12.5% and if I were to put down a normal 20% down payment a COC return of 62%!!

Not in this world right?

So I applied the 60% rule (the 50% rule with my twist for turn keys as I want to make sure I do not get burned).

$1,950 * .6 = $1,170

Leaving $780 for mortgage payments. Assuming a $500 mortgage this would give a solid 13% COC return.

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What say you? What am I missing?

If the fear is not being able rent again at those prices, how did the PM get those leases in the first place?

Looking forward to the feedback!