Four Plex- I want to pull the trigger on this one but should I?

[Rick Hernandez]

Good morning,

Here is my background. I am a newbie investor who purchase first home about 5 years ago. Since that time I have acquired a total of 8 SFH in my area. All of the homes cashflow well, are located in good areas so that resale in the future shouldn't be an issue. I am cash-flowing fairly well considering my homes weren't in real bad shape. Mostly cosmetic repairs needed.

I have been looking for a multi for so long but I typically find them to be overpriced but they all go pending very quickly.  Makes me scratch my head like I might be missing something.  I have been evaluating this deal and I am curious on your thoughts.

Background on this deal.  Owner has owned this since 2008 when he purchased this on contract.  He has it listed for $115,000 a drop from his original list price of $125k.  He lives on site in the two bedroom unit so I need to make assumptions on what that might rent for.  All of the mechanicals are 10 years old and the metal roof is 1 year old.  Siding is vinyl.  so cap expenses should be minimal for some time.

He currently pays for electric, gas and water.  The rub here is that the electrical meters are all separated but I believe most people don't realize this since it is not stated anywhere.  I am thinking there is some opportunity here to slowly switch electrical into tenants names or to bill them for actual usage.  Three units are completely separated and the fourth is metered to the house.  If I adjust for three of the units paying their own electric than my approximate electrical usage drops to $2066 per year which increases cash flow to $5,248 annualy.

Here are my numbers as they currently stand:  Assumes $700 mo for the owner occupied unit than 500, 550 and 350  monthly.

All tenants are on a month to month so I am not locked in with them so if they don't wish to pay their own electric I can move new tenants in.

Inputs	Results
Purchase price:	$105,000	Down payment amount:	$21,000
Scheduled monthly income:	$2,100	Total out-of-pocket expenses:	$22,200
Other monthly income:	$0
Vacancy rate (%):	5.00%	Debt Service Calculations:
Number of Units	4	Blended rate:	5.500%
Financing information:	1st loan amount:	$84,000
Down payment (%):	20.00%	1st loan monthly payment:	$477
1st loan portion (%):	80.00%	2nd loan amount:	$0
2nd loan portion (%):	0.00%	2nd loan monthly payment:	$0
1st loan interest rate:	5.500%	Total annual debt service:	$5,723
1st loan term (yrs):	30
Amortization (yrs)	30
1st loan closing costs:	$1,200	Income and expenses:
2nd loan interest rate:	0.000%	Gross scheduled rental income:	$25,200
2nd loan term (yrs):	0	Gross other income:	$0
Amortization (yrs)	0	Total gross income:	$25,200
2nd loan closing costs:	$0.00	Less vacancy:	-$1,260
Total annual operating expenses:	-$15,114
Operating Expenses (annual):	Net Operating Income:	$8,826
Real estate taxes:	$2,300	Annual cash flow:	$3,103
Insurance:	$900
HOA dues:	$0
Management fees:	$2,640	Rates and ratios:
Legal expenses:		Capitalization rate:	8.41%
Marketing:		Cash-on-cash return:	13.98%
Landscaping and snow removal:	$0	Debt service coverage ratio:	1.542
Maintenance and repairs:	$1,320
Reserves:	$528	Other Calculations (precise in one-loan scenarios):
Supplies:		Minimum desired DSCR:	1.2
Other:	$0	Purchase price to support minimum DSCR:	$134,935
Landlord paid utilities (annual):		Average Cap Rate Supported (based on local area):	9.6%
Garbage:
Water and sewer:	$2,052	MAXIMUM purchase price to support required Cap Rate	$84,730
Electricity:	$4,210
Gas:	$1,164
Phone/Cable/Internet:	$0