First rental deal. Four Plex

[William H.]

I just happen to stumble on to what I thought was a ok deal. In my area there are not a whole lot of multi unit places. Some downtown in the historic district, but they normally are pretty expensive. This four plex in the middle of town, near just about everything business wise. As far as comps their is one other area that is nearby that is just four plexs. There were 3 sales in that area (162,500 - 162,500 and 180,000) and two that are currently "pending" that were listed at $179,000 and $188,000. I didn't like these buildings because after requesting the info on the rents and the expenses I realized that the city didn't provide the trash service, and the owners of 2 units were splitting a dumpster and I think the yearly cost there was $2300. So I didn't like that, and I didn't like that if the other owner decided that he didn't want to do that anymore I would have to pay the whole amount. I mention that because I would rate that area and the building the same as the one that i am looking at currently except that the trash is picked up by the city as part of the tenant paid for water bill.

I thought that the 4 unit place, for the price was a good buy because it puts each unit around 38k each and while this is not exactly the place that i would want to live, its better than the area where the $38k houses are. However, after reading some others talk about the downsides of their 4 plex buildings I am starting to have second thoughts.

This would be my first place that i am buying to just rent out. So let me know your thoughts.

Also, 3 a/c units were replaced when the current owner bought the place about 12 years ago, and 1 was replaced about a year ago, and the roof was replaced 5 years ago. I based my current rents at $600 x 4. However, the owner says that he is going to $650 as he has turnover. So I believe two are at 600 and two at 650. Also, one tenant that has been there the longest (12 years) has paid the $40 late fee every month, I think that she gets a check later than the 1st is the reason here, and I think the thing to do is to just go to $650 and change her due date. As far as the utilities, everything is tenant paid. And the tax and insurance (new policy quote) is $5100 a year.

Price $155,000 (this is what the tax assessor has the build at, which is normally low)

Down Payment $40,000

Mortgage $1069 (P,I,T,I)

Rent $2400

Cash Flow - $1331

I then took off 25% for vacancies and expenses as I would be managing myself. So $1331-$480= $851. 

So in my head this sounds pretty good, not so much if you do 50% instead of 25%. Thoughts?