Need help with first time 4 unit off market analysis

[Harlan V.]

Hi Biggerpockets! I'm a new investor and I'm analyzing a potential off market deal for owner occupancy but I'm nervous because I'm on the very high end of what I can qualify for and the only reason I qualify is due to expected rents and overtime. This would be my first deal if I go for it and I'm moving out of my rent free parents home so it's a little scary! I'm nervous because if a tenant stops paying I'm concerned that I may not be able to cover expenses if I have a trifecta of a bad tenant, lack of overtime at work, and something breaking. It's an older (1920s I think) 4 family property but seems like most big stuff was replaced within the last 15 years though I will verify that before proceeding. Would like some thoughts on my analysis, am I being too conservative or not conservative enough?

Location is 02780 Taunton, MA

Analyzed as fully occupied but I will be moving into 1 unit so that will drop the rent by $1350:

Rents: $1800, $1600, $1400, $1350

Total rent: $6150

Purchase Price: $650000

Market value: $700000 (based on my market analysis, there are multifamilies in the area with less square footage and less bedrooms that sold above $600k and a couple over $700k)

Down payment: $130,000

Closing costs: $10000

Renovation costs: $0

Total out of pocket: $140000

Total reserves: $20,000 (stretching a bit with the reserves, have to liquidate some things that I don't want to liquidate, but it's there if I need it, $5000 is liquid at the moment)

Mortgage, taxes, and insurance @4.75% interest: $3580 (I think taxes will be lower the first year but just preparing in case the rate is reassessed after purchase)

Vacancy rate 10%: $615

Management: $200 (I will be keeping the current property manager and he only charges $50 a unit, red flag? Current owner doesn't seem to have a problem with him)

Utilities: $600 (too much, not enough? I think the only utilities I cover is water and common area electric)

Capex and maintenance: $400 (read a comment on here somewhere that they budget $400 a month for south shore 4 unit properties, too little?)

Total in: $6150

Total out: $5395

Cashflow: $755/mo

Yearly cashflow: $9060

Cash on cash: 6.47%

Instant equity: +$40k

Cashflow while living in unit (not counting cost of my own utilities other than what the landlord pays anyway): $-595

Cash on cash return is a little low but my goal as an investor is wealth building so I'm willing to take a little lower cashflow if it gets me in the game. Market has gone crazy and it's hard to find anything that cashflows at all, this one is intriguing because it has a cheap property manager that is already familiar with the tenants, seems to have been well cared for, is already rented at market rent (which isn't the case for 90% of the stuff I've looked at), and neighborhood seems good (I'm not the best judge of that but it seems like a place I wouldn't mind living, there are some traintracks nearby though). One of the units could potentially have 1 more bedroom if I install a closet, so a small opportunity there to add value in the future.

Want to know am I being too conservative with my estimates or not conservative enough? If I'm way off it could turn into a big loser which is what I'm afraid of. 50% rule would put it at about $400 cashflow which isn't great but at least it's positive.

Cashflow will be negative while occupying 1 unit but if I calculated correctly it should only be about $600 a month which is coincidentally roughly the amount of loan paydown I have so it's kinda like living for free? I also have to potential to roommate with a family member which I would charge them $800 a month for, don't want to rely on this but it would help. My personal finances would allow me to spend conservatively about $1200 on rent if I worked zero overtime which I have worked a lot of up till now but I believe that may slow down significantly soon so I want to make sure I don't get screwed relying on overtime that I might not get. My biggest concern with this deal is that I'm not sure if I'm running it too tight? If I have a tenant issue or something big breaks right away it could clean out my reserves quick. On the other hand, because I'm buying it at a discount I kind of see that as being able to resell it for free in a pinch, but that assumes the market stays elevated and I don't like making assumptions. Big picture though I believe if this works I should do well long term as the numbers get better year over year and if there's no vacancies or maintenance in the first 6 months my reserves should build up very quickly. Should I pursue it if the seller says yes?