First Multi-Unit (6) Deal

[Clint Richmond]

Hello everyone!  I'm new to the BG family, and have learned so much from all of the articles and forums.  I'm analyzing my first deal, and wanted some opinions.

I'm looking at a 6-unit building, with 2 efficiency's and 4 1-BRs, for $265,000.  Rents are currently low:  435-efficiency, 550-1BRs (3,070).  Market value is closer to 550-efficiency, 650-1BRs (3700), possibly even 600/700 (4000).  This truly is in an A+ location.  95-100% occupancy.

I obtained the 8825 form, but honestly am quite new at this and needed some help deciphering line-items.  Here are the line-items (most recent year):

Insurance:  5,482 (previous year was $2,121 - why the discrepancy??)
Legal and Professional fees: 1,520 (is this where PM is covered?  would this be low?)
Repairs:  3,010
Utilities:  2,884 (tenant pays heat/electric/gas, owner pays water/sewer and trash)
Taxes:  8,925

From my analysis, using the 50% rule, at the $3,070 gross, would leave $1535 after expenses.  With $53k down (20%), that would leave $212k mortgage at 5%, for a payment of $1138.  This leaves roughly $400, in cash flow per month.

If we use the $3700 gross amount.  After the 50% rule, our cashflow is a little over $700 per month.

Based on the numbers above, is the 50% too low?  Some other items to note.  Only concern regarding major work needed, is some knob and tube wiring, but I am told the sellers agreed to fix this prior to sale.  Also, I do not foresee any work needed upon purchase, as all units are in good condition and under lease.  I do plan to manage the property myself.  (My girlfriend is a property manager for a larger company and knows the area/market very well.  We have contacts for contractors and would have help with any work needed to be done.)

With cash flow of $700 per month, that would give us cash on cash return of 14.7% with $58k out of pocket (53 down, 5 closing.)  The high side cash flow of $862 per month, 10,344 per year, would be a return of 17.8%.  The current/low-side of $400 cash flow per month would be a return of only 8.2%

Based on the fact that I (my girlfriend) knows the market, and there seems to be positive cashflow, this looks like a good deal.  (even if the returns are on the lower end.)  Am I missing something? What additional questions should I be asking?