38 Unit Purchase. $110k cash flow. Good deal?

[Andrew Michaud]

I am looking into purchasing a 38 unit from a company. Price is approximately $35,000/door for a total purchase price of $1,330,000. All buildings are in excellent shape, but are in need of roof replacements. Property after debt services cash flows $110,000 per year. Is this a good deal?

[John Clark]

Quote from @Andrew Michaud:

Price is approximately $35,000/door for a total purchase price of $1,330,000. All buildings are in excellent shape, but are in need of roof replacements.

 Your math is wrong. Recalculate purchase price adding cost of roof replacement to the $1.33 million you're paying up front for starters.

Then calculate cash flow PROPERLY. There's a lot more to cash flow than just debt service. Can you pay all the expenses of the property (taxes, management, repairs, vacancies, general administration, reserves, etc. etc. etc.) out of that $110,000 each year? How much is left over?

Then compare your net return after all expenses (including tax savings on other income from depreciation) on the amount of money you're putting into the property and the time you will spend managing it, to the money you can make in some other investment. Adjust for risk. Look at your answer.