Need Help making a decision

[Chaim Zigelman]

Hi All,

I found a property that is requesting $425,000. I need some help to determine if I should make an offer or not. If I do, i plan to make it between $360 and $390k. I assume $390k as that is what I am told by my agent that he will not go below. 

Any help is appreciated. LTV is 75%.

5 Plex

Total Rents: $45,600
Vacancy 8.7%: $3,967
Taxes: $4,520
Insurance: $2,100
PMC: $4,560
Repairs: Unknown (Could be $1,000 or best guess of 10% of GRI $4,560) Need inspector
Electricity, Heat & Water: $2,500
Misc.: $200

Total Expenses: $14,880

NOI: $26,753

Mortgage: 4.63% 
Debt Service: $18,026

Cash Flow: $8,727

Down Payment: $97,500

CoC if Maintenance at $1,000: 8.9%
CoC if Maintenance at $4,560: 5.3%

The maintenance portion of the above is not fully vetted and could bring my CoC return lower. I was also told that we could tell the tenants that they have to pay for heat and hot water at a charge of $35 a month. This would almost eliminate the $2500 EHW expense. I am not sure if this is common practice so not sure if I should take it seriously. If I am able to do it, it would raise the CoC considerably.

Thoughts? =)

[Adam Bartomeo]

First rule of RE - never believe a realtor, get the price that you need not what the realtor says they will accept.

The GIM seems high (about 10) and the cap rate seems low. 

Why would you need an appraisal? 5+ should be appraised by income and the rate. 

With a NOI of $27,000 and a rate of 8.2% you should pay no more then $329,000. That is only if your comfortable with making 8.2% on your $.