What do you think of this deal?

[Matt B.]

Hi All - I am looking to make an offer on a two unit town home. Both units are rented out with long term tenants in place. Below is a screenshot of the model results but see below for a break out of the assumptions:

• Purchase price = List price (room for negotiation)
• Closing Costs = Estimate from lender
• Down Payment = requirement from lender @ 25%
• Interest rate = rate offered on a two unit rental from lender
• Total rents/Month = current rents in place (room to raise based on market)
• Property taxes, Insurance, Water/Sewer, Trash removal = all reflect actual amounts paid by current owner
• Vacancy rate = 10% of gross rent
• Cap Ex = 5% of gross rent
• Maintenance & Repairs = 5% of gross rent
• Monthly free cash flow = $155
• Total ROI = 7.14%

My question is simple, do you think this is a good deal? Is this a deal you would accept in todays market?

I will offer less than the $200K its advertised for, trying to get it for $190K, which will improve the free cash flow and ROI slightly. The model below more accurately reflects a worse case scenario rather than the full potential of the property, as rents can be increased (need to see current lease in place to know by how much and when), and purchase price can be lower.

Let me know your thoughts!