6-Unit MF in Low Income Area

[Paul Davis]

Hello,

My name is Paul from Grand Prairie TX.. New to the BP community and REI. I have always wanted to get into REI, but found every excuse not to do it. My wife and I decided to take ACTION and closed our first SFH in June. What an amazing community BP is offering so much education and information. I really enjoy reading through all the post and listening to the podcast (on show #21), so I have a long way to go.

I was hoping for some opinions/feedback on my second potential deal:

Background:

6 unit MF all units are 1 br/1 ba around 450 sqft.  Building is in a low income area of town (Military Base in town).  Building is in good shape, however all units need cosmetic updates.. paint, stripping/waxing floors...etc.

Current rent is $375/unit and 100% occupied. Current owner has recently raised one unit to $395 and will continue when vacancies occur.  The place stays rented(per rent roll)  

I have offered $90k cash with hopes of refi later. 

Here is what I know:

$27,240 current income (per rent roll, but will verify current leases during due diligence period)

• -$2,160 PM Fee 8% (currently owner is only using for rent collection... don't understand that one (questionable screening process along with high turn over)
• -$1,300 Property Taxes
• -$1,500 Insurance
• -$2,700 Repair (last two years expenses)
• -$2,700 Cap Ex (Roof 5 years old, 3 units new AC and Water Heater)
• -$3,840 Trash and water (other complexes in town have metered water-future thought)
• -$4,050 Vacancy Rate (15%- Understand this is high, but would expect better screening from PM Co- should be able to reduce)

Hoping I calculated the returns correctly.

NOI: $8,684/90,000= Cap should be 9.65%

ConC: 9.65%

I would appreciate any feedback.

Thanks Paul