Working a 5 unit multifamily deal, 4 duplexes and 1 triplex - Need advice from the veterans!

[Franklin Anderson]

I am working a 5 unit multifamily deal - 4 duplexes and 1 triplex. All units are currently occupied with the average tenant being there over 3 years. Current rent rates are slightly low and should be raised at each tenant turnover. I have been approved for financing at 80% LTV, 5%apr, 15yr term, 3yr refi/baloon. The owner is willing to sale the properties for payoff plus 2014 taxes $954,900 ($188k/ea plus $14,900 taxes). They are extremely well built units (all brick), needed known repairs will be new roofs within the next 3 years - estimated cost to be $20 - 25k. Last unit sold for $200k in 2013.

• Current rental income is $9,400/mnth $112,800yr, at 85% occupancy it drops to$7,990/mnth $95,880/yr.
• Combined yearly taxes are $14,900
• Estimated Insurance $5,000/yr
• Estimated Maintenance Cost $750/mnth $9,000/yr
• I will be required to pay all closing cost and appraisals - estimated $8 - 10k
• I will be required to put $60k down and use a current property to make up the remaining 20% down - which will be refinance.
• Loan amount will be $871,254, 5%apr 15yr am, 35 month maturity - $6890/month, $82,678/yr
• I am assuming no appreciation - loan balance in 5yrs if all goes well should be approx $615k, add the $60k down, possible sale for $940,000 = $265,000 equity

We currently own a small single family rental home and one owner occupied multitenant commercial property.  This is a big deal for us.  The biggest unanswered question her is appraised values - if the properties appraise below the payoff the bank may consider a shortsale at which time I feel the deal would look way more attractive.

My gut says the cash flow on this is too tight.  One big problem and we are out of pocket.  Would love to hear the more experienced investors advice on this.  All help is very appreciated.

[Account Closed]

Franklin Anderson you said you'd hate to let this go? Why? First rule of investing is not to get emotional and buy a bad deal. This is a bad deal. Move on and spend your time finding one that actually makes you money!

The company I work for owns 9,000 units. We look at hundreds of deals per year and usually only buy 7-10. You have to pass on deals that don't work, no matter how you feel about them.

You are in this business to make money.