Critique my Potential Purchase Lexington, Kentucky

[Michael Kay]

Hi! I'm looking at my first purchase and I think I'd love feedback on the numbers I found

12 unit apartment building in Brucetown area

Purchase: 380,000, 20% down
Expenses, Annual:

  Property Tax: 1400
  Insurance: ~3000
  Maintenance: 2000

  Mortgage Pay: 19, 231
  Vacancy: 3000 (5%)

  Property mangement: 6000
  Misc Cost: 200

Annual Income: 57000
  Cash Flow: 25,000

NOI: 44,000

I'm really thinking that this may be the one I want to make my first purchase but I'm hesitant because it seems too good to be true. The cap rate seems kinda high. Also, some minor rehab appears to be needed for a few of the units. The area seems kinda like a C neighborhood If I do make an offer, I'm going to offer much lower because of these reasons. 

[Garrett Spear]

Hi @Michael Kay,

Here are a few of my first reactions:

-Property taxes in Lexington for a parcel worth $380,000 will be much greater than $1,400 per year. The local PVA website is a great resource: http://fayettepva.com/

-The city has historically underinvested in the neighborhood of Brucetown. You are correct in classifying the neighborhood a C, it might even be a D.

-What types of units are the apartments, and what do you expect to get in rent? Based on your 57,000 figure for annual income, are you estimating $400 rent per door per month?

-Is your maintenance budget $2000 for the entire year on 12 apartments? This estimate is unrealistically low based on my experience.

Where are you getting your cost estimates?

Hope this is of some use and feel free to contact me if you want to talk further