Two 4-Plexes

[Mark S.]

I'm currently analyzing the two 4-plexes below. Even if they both check out, I will buy one or the other, not both.

FOUR-PLEX #1 - $125,000
All heating units less than 7 yrs old. Roof replaced 5 yrs ago.
All units are 2BR/1BA and about 800 sq ft. 75% occupied.
Not sure why they're different, but rents are said to be:
Unit 1: $425
Unit 2: $425
Unit 3: $350
Unit 4: $375
Rentometer shows median rent at $630 and 10th percentile at $450. I should be able to raise rents, but let's just go with these for now.

Gross Rents: $1,575/month
EXPENSES:
Vacancy (at 8%): $126/mo
Taxes: $121/mo
Insurance: $117/mo (I totally guessed on this and need to shop it out)
Prop Mgmt: $145/mo (10% only when occupied)
Repairs/Maintenance (at 10%): $158/mo
Cap-Ex/Reserves (at 10%): $158/mo
- TOTAL EXPENSES: $825/mo (which is about 52%).
- Debt Service (20% down, 5% interest, 30 year loan): $537/mo
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Cashflow: $213/month (assuming I buy at asking price and don't raise rents).
Cashflow: $398/month (assuming I buy at $115,000 and raise rents to $450)
This one seems to have HUGE upside with raising rents. I'm much more excited about this one than #2.
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FOUR-PLEX #2 - $148,000
Has new roof. 50% occupied. All units are 2BR/1BA and about 800 sq ft.
Rents are $450/unit.
Gross Rents: $1,800/month
EXPENSES:
Vacancy (at 8%): $144/mo
Taxes: $144/mo
Insurance: $117/mo (Again, total guess. Need to shop it out.)
Prop Mgmt: $166/mo (10% only when occupied)
Repairs/Maintenance (at 10%): $180/mo
Cap-Ex/Reserves (at 10%): $180/mo
- TOTAL EXPENSES: $931/mo (also about 52%)
- Debt Service (20% down, 5% interest, 30 year loan): $636/mo
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Cashflow: $233/month (assuming I buy at asking price)
I'm not thrilled at all about this one, however, if I change the purchasing price to about $115,000, I get a cashflow in the $376 - $406/month range.


BOTH AREAS SEEM TO BE "C" CLASS NEIGHBORHOODS, AT BEST. IN PROCESS OF FURTHER RESEARCHING THE AREAS.

Thoughts?