need your expertise analyzing this 12plex

[Spencer R.]

Hey everyone,

I have a potential deal I need some help with. I can buy an older 12 plex in a nice residential area (mostly sfh's on the street) for 560k. Gross rents are 75K/yr for 2013, with net after expenses (not including financing) of 51K. All units are 1 bdrm/1 bath.

The good:

-I have a couple of other rentals in the area and know the market...no problem filling with good quality renters here. college area. low vacancy.

-It is a solidly constructed building that has been kept up well in and out.

-Newer replacement windows, high ceilings, charming apartments/exterior, good parking.

-Separate electric meters.

-rents are on the low side, especially since heat is included (see below)

-have not seen a deal like this in the area lately

The not so good:

-Building was built in the 20's.

-Older wiring but newer breakers. limited to 2 circuits per apt. ranges are all gas.

-landlord pays for all heat with a gas hot water bolier/baseboard system. There is one large central (~25 yo) boiler, tenants do have individual thermostats however.

-gas bill for heat/hot water is 6.5k/yr

-water/sewer is 7.5k/yr!, 6x what I would expect for the area

-owner wants to close quickly and requires almost all of my ready-cash down, 400K, the rest owner financed--rate tbd. he does not want to wait for bank financing.

My other units are older too and I have good local repair guys, but I am mostly worried about paying for heat/dealing with a boiler, the horrendous water/sewer bill and limited wiring. Anyone have experience or suggestions in dealing with these issues. I would get the boiler checked out since I worry it is using a lot of water. Do you think the numbers make sense given these challenges? Taxes and regulations are low in this area.

Thanks!