Awesome looking 5PLEX deal in NE Quebec, too good to be true?

[Peter Michael]

Hey everyone! Sorry in advance if this is not the right place to ask for help and external opinions... But I've got a deal that I'm this close to buying, but I'm still worried that it may be too good to be true. Here's some info, I would greatly appreciate all the opinions you experienced folks can give me! One more thing... Sorry for the photos, these are the only ones the Realtor's got posted...

First off, I would be investing long-distance, I'm from Montreal, and the property is located in Baie Trinite, in Manicouagan. It's a relatively small coastal village with a population just over 400. It would be near impossible for me to visit the property on my own. 

Secondly, the purchase price is $52,500 CAD. There are 5 units, Three 4 1/2 units and two 3 1/2 units. Two of the 4 1/2's are currently rented for $525 a month, the other 4 1/2 is rented for $460 a month, one 3 1/2 is rented at $425 a month, and the last 3 1/2 is, according to the owner, only rented for 8 weeks totaling $1,200 of yearly income from it. 

Of course, I did my own analysis and I just wanted some opinions here, the net operating income I've got here (with a conservative $23,000 of gross yearly income, which is theoretically supposed to be over $24,000) is about $5,410. 

After a mortgage with a 20% down payment (10,500) and an estimated $2,000 of closing costs and legal fees (resulting in a $12,500 total down expenditure), net income would total just over $3,000 a year. Resulting in a COC ROI of about 24.5%.

Property management is taken care of, the realtor's helping me out with that. 

So is there anything I'm missing here? I've never purchased real estate before but I'm taking serious steps and I need to make a concrete decision soon... Any constructive feedback is appreciated! 

Thank you,

Peter

[Guillaume D.]

Hey Peter! 

When looking at properties outside of major cities, the numbers always look attractive, but you have to be careful. First off, this property likely won't increase in value over time due to its location, so you have to base your decision solely on cashflow. From the pictures, the building looks quite old. Did you consider cost of upcoming repairs that can get quite expensive such as roofing, doors and windows, foundation/structural work (if needed), etc? Plus, vacancy rates can get very high in small markets so make sure you verify the bank deposits from the seller to make sure he really is collecting rent as he says he is on a monthly basis. Another problem you get with very small long distance markets like these is having to find a property manager. Typically, property managers like to do business in major cities rather than very small markets since there's usually not enough work for them to make a living. Do you have a backup plan if the property manager you are referring to decides to bail? Are you going to be able to manage it yourself? Collect rents if some tenants insist on paying cash? Doing visits when you have to rent an apartment? I know the broker probably tells you it's going to be easy and all that, but don't forget his job is to sell the building ;)! Hope this helps! Keep us posted. My 2 cents!