Deal analysis: Does this one fly

[Chris C.]

Hi all,
I am still looking to make my first purchase, and this is a fourplex I am seriously considering. I would like some input on the numbers. The city I am investing in is a "depressed market", meaning no jobs are coming in and people are leaving. No signs of turning around anytime soon. There are a couple of abandoned fourplexes in the neighborhood. Neighborhood is average quality, but property values have declined 5% a year, for last six years.

These are my initial numbers:

4 one-bedroom apts.

Asking price: 75000 (haven't made my own lower offer yet)

gross - 2500 monthly

- 50% expenses= 1250 NOI
- mortgage 400-500= 750-850 cash flow

I have potential owner financing at 6% 5 year balloon, down paymt to be determined. I'm going to offer 5 or 10%.

The property does have some soft spots in floors that will need to be addressed as well.

Depending upon the financing, cash flow should average around 200 per unit.

Is this good in a declining (speculative?) market?

Thanks

Chris

[Ned Carey]

I would have thought Norfolk would have good steady shipyard jobs.

The deal looks good especially with the owner financing. You description of the market is what concerns me. I guess a key question is what are rents doing? Are the rents declining too? Is the neighborhood declining or just values? In other words is crime increasing, properties coning into disrepair, lack of maintenance, vandalism etc. These would concern me much more than than values. Good luck - Ned