This Deal Analysis (Good, Bad, or Ugly)

[Mitchlyn D.]

Team,

Here is a deal which i'm contemplating purchasing.  But wait, is it worth it..

This would be purchased as an owner occupant using my 2nd VA Loan.

- 4 unit property asking a sale price of $260K

- 2/2 rented @ $695 per month

- 2/2 rented @ $695 per month

- 2/2 vacant

- 2/2 vacant

= Total Gross would be $2,780

---------Expenses(Monthly)----------------------

- Taxes $178

- Vacancy $139

- Repairs & Main $139

- Cap Ex $139

- Prop Manage $278

- Water and Sewer $180

- Insurance $120

- Mortgage(P&I @ 3.75%) $1,204

= $2,377

------------Gross - Expenses ----------------------

- $2,780 (Gross) - $2,377 (Expenses) = $403 monthly cash flow

Is this a good deal?  It's about $100 per door.  The area has many apartments and the street has alot of 4 plexes which makes me nervous because of the other competition.  However, this fourplex is up to par(all tile floors, bathroom and kitchen redone) and will be physically seeing the inside tomorrow. Thoughts, advice, comments, etc are very much welcome.  Thanks in advance!

[Andrew Johnson]

Mitchlyn Davis For what it's worth, it looks like your expenses/cap-ex/vacancy/etc. all assuming 5% of gross rents. You know the area and condition better than me but those could be *optimistic* numbers. Especially since two of the units are vacant now. If you bump those to even a slightly less optimistic 7% then your cash-flow takes a heck of a beating.

So are you assuming 5% based on: a.) hope, b.) educated guess based on market insight, c.) trailing financial information provided by a previous owner/property manager?