25 Units Purchase Planned. Would love thoughts/alternatives.

[Brian Black]

I am thinking of purchasing a 25 unit group of mixed properties in one town. 2 small mobiles, 1 SFH, multiple duplexes, 1 quad, 1 8-plex. Total 18599 sq foot. Purchase price $1,000,000. Repair and closing cost estimate $400,000. Down pmt 20%. Interest rate 5.15% with no PMI or lender points/fees. Total monthly rent currently 16,000 and with improvements/rennovations expected to be 20,000+. I assumed a 7% vacancy rate, 7% cap ex, and 10% to property mgt (as each place will be "fully updated" to a B or better standard most in B locations). P&I will be expected to be $10,500. Utility/Lawn expenses are about $2000 per month. Local PM is excellent.

Using calculators I find I will be bringing in just shy of $200 per door per month with an approximate 5% COC ROI and a purchase cap rate of 15.5%. The final purchase cost per Sq foot will be about $75.

I plan to purchase and then refinance once everything is fixed up and rented. 

What are the good and bad of the deal?

What options would others consider instead? What type of investments have you done in small multi-space?

Given the above, does this seem like a reasonable long term buy and hold investment?

What options would others consider instead?

If I had to hold 1 year of 401K/IRA investments to make it happen would it be worth it?

[Michael Orlando]

I didn't take the time to really pencil this all out, but sounds like the COC is pretty low. I wouldn't do a deal at 5% COC, but as long as you're personally okay with that metric, then that is totally up to you. Sounds like you aren't taking on investors, but usually investors will want to see 8%+. There could be a miscalculation in there somewhere though if your COC is really that low. I would say for the cash you're looking to invest, you could place it elsewhere and expect a much better return. Again, I did not pencil this all out though so I'm assuming your calculations are all correct and there is no error causing your COC to be lower than expected.