2 seller financing multi-units

[Jean M.]

Im interested in 2 two family homes in glens falls ny. The seller is a landlord who is looking to retire and is willing to hold a note on the 2properties. He wants $135,000 each with 10% down and 4.25% interest for 30years. Neither home needs workThey both gross $1600 per month each both have $3700 tax and $1263 insurance. The sewer/garbage/snow removal is estimated at $140 per month on each property. I ran some numbers and offered him $100,000. He says his price ia firm. 

Can anyone tell me if this is a deal i should look into or should i drop it and move on. Im new to investing and don't want to over analyze but i also dont want to have negative cashflow. 

[Sam LLoyd]

Wow, that's a tempting deal since you'll be into it for so little money, and the note has such good terms.  The cash on cash return (by my calculations) would be less than 5%, however, if you added your principal pay down (phantom income),   it would be a 17 or 18% return on your investment, and that doesn't include any other phantom income such as depreciation or being able to write of the interest payment.

So.  If you are planning on a long term investment, this seams like a viable option to get into it with little money down.  If you have to make more money/month... move on, though I don't know what else is available in your area.

Here's the biggest decision maker/breaker:  What is your vacancy rate and maintenance cost.  If it is a newer building with very little maintenance, and you hustle as a manager in a market that has low vacancy, and you pay yourself for management, you could be making $175/door... not bad.  If vacancy floats around 10% in your area, you have to hire a manager, and the buildings are older with windows and roofs needing to be replaced in the near future,  you'll be losing money every month.  So, get us the maintenance and vacancy numbers for an more complete answer.