Help me analyze this deal? What am I missing?

[Michael McCorkle]

I would like help analyzing a deal that looks good to me. Even though I am not able to move forward on it at this time I am trying to hone my analysis skills for when I can. Please give me your thoughts.

1. Three triplex units next to one another. Historic converted homes in different stages of condition. One has a unit over the garage, so there are ten units total.

2. Six units occupied, two available for occupancy but unadvertised due to the sale process. Two in need of major cosmetic work or remodel.

3. Rents currently 450-850 per unit which could go up to 550-950 with improvements.

4. Average property cost is $100,000.

5. ARV would put the properties in the 175-200,000 range.

Assuming I bought the three properties as a portfolio with 20% down here are my estimates:

• Mortgage Estimate: $250,000
• Cash Investment including some improvements: 75,000
• Monthly Mortgage Estimate: $1600 @ 5%
• Current Monthly Rental Income with leases: $3000
• Potential Monthly Rental Income with minimal renovation $5000
• Estimate Year One Assuming Improvements and additional tenants: 50,000
• Assumed Vacancy Rate: 10%
• Effective Gross Income: $45,000
• Operating Expenses including taxes, assuming self-management: $15,000
• Net Operating Income Year One: $31,000
• Debt Service: 19,200
• Cash Flow: $11,800
• Return on Investment Year One: 16%
• ROI Year 2-5: ?
• Debt Service Ratio: 1.6
• Cash on Cash Return Year One: 41%
• 2% Rule: Currently 3000 with potential for 6 or 7000 after improvements