Do we have a deal?

[Joshua Martin]

Hey gang, 

 So I'll try to make this post as detailed as possible with what I'm currently going on, and I thank you in advance for your help and guidance. 

 I've had my eye on this property for a while, and it has actually just been removed from the market (but this doesn't mean I can't make an offer). It is a six unit on one lot, a four family and a duplex behind. Here are the size and rents for the units:

 4 family:

1 3 bd @ $695 p/m

1 2 bd @ $645 p/m 

2 1 bd @ $525 p/m = $1,050 p/m

 Now the deal becomes interesting, because the duplex is not finished. I'll get to that shortly, but once renovated:

2 studios @ $425 p/m = $850 (but just call it $425, because I'll live in one of these).

Asking price: $79,900

What I want to offer and how I want to propose it:

Offer: 70k, 3k earnest money, seller carries 12k for 3 year term at 3%.

Renovation (this is fairly crude until I walk through with a good friend of mine who has been at this a while): 40k - I would also hope to save on some of this by doing much of that myself. This money I can borrow privately at 2%, undetermined term but I would hope to refinance once the property was up to par and rented out.

All in: 110k

So that I'm not misleading, I'll say here that the area is probably C-, right on the east edge of Washington Park for you Milwaukee natives, and that this could pose difficulties (or perhaps scare off many investors?).

Crude analysis:

50/50

Monthly rents $3,340

50% to expenses, 50% available for debt service: $1,670

 Debt service $611 (An estimate of trulia of 83.2k @ 4.125 amortized over 30)

Cash flow: $1,059 ~ Annual, $12,708

1% Rule: 

Purchase price (all in) 104k, monthly rents, $3,300 = 3.1%

And now, sorry this will get a bit longer, a slightly more detailed form (the best I can do at this point):

Gross monthly income: $3,340

Monthly Expenses:

Vacancy @ 8.3% (local property manager though this was accurate) = 277.22

Water & Sewer = $102

Management @ 10% (although I'll do it for the foreseeable future) = $334

Garbage? @ $15

Taxes: $197

Insurance (I have no idea how to get crude quotes) so, $75

CapEx @ 10% = 334

Total Monthly Expenses = $1,334.22 (of which I'd be currently paying myself the $334).

Available for Debt Service: $2,006

Estimated Debt Service: $700 p/m (rounding up a little bit - I know, still quite crude).

Cash flow: $1,306 @ $217 per unit.

In short, it looks to me like a difficult but good deal. Partly I'm wondering what I'm missing (because I have a hunch there's something), and I'm also a bit sketchy on the details of estimating various debt payments. The number I want the seller to carry, for example, and how that is 'typically' structured. 

It also looks like an education in investing, so I'm torn. Talking to a commercial lender about possibilities later this week. I'd appreciate anyone chiming in, particularly Milwaukee natives who might not like the area (but guys, keep in mind you have Washington Heights just to the west and the lovely Martin Dr. neighborhood just south ;).

 Again, thanks in advance.

Best,

JTM