3 Unit deal In Alabama

[Richard Decoste]

Im looking into a 3- 1Family deal in Muscle Shoals, Alabama. The owner is in his 70's and wants to retire. I'll be collecting $1400/month total. They are next to each other on a 2 acre property. He wants $125,000. Should I jump in?

[Aaron Montague]

It meets my 1% starting rule. I.e. Monthly rent divided by asking price is more than .01.

Next I'd find out how much I'd need to pay for the following items:

Taxes

Sewer and Water

Trash

Heat/Utilities

HOA

Cap Ex and Ops (how much are you going to save each month for everything from changing community light bulbs to replacing roofs)

Insurance

Mgmt Fee (as a %)

Vacancy (as a %)

If all of the above plus your mortgage payment (principle and interest) left me with $100/door/month profit AND 15% ROI (cash on cash) I'd start the negotiation process. That is when I get into all the questions @Frank Oudheusden mentioned above.