Help with Analysis of 2 Investment Properties

[Greg Snyder]

Hello: I would appreciate anyone's input into my analysis of 2 multifamily apartment buildings I'm looking at. I'll use the asking price for the analysis, although I expect I'd offer less for each of them. Both are in same city, about 1 mile apart. Economy of city is decent but I would not expect much price appreciation in the 10 yrs I plan to own the buildings. I'm relying only on cash flow (not cap appreciation). I'd finance either with a 75% mortgage, 4.75%, balloon payment in 5 yrs, 20 yr amortization period. They are located in another city, so I'd hire a management firm for each. I grew up in the city where they are located so I know they are in stable neighborhoods (not declining but not improving either).

Prop #1: 10 units in 2 adjacent buildings.

Price: $280000

Down Payment $70,000 and Mortgage of $210,000

Annual Rental Income: $47,500

Annual Expenses (incl taxes, ins, mgmt fees): $25,400

Net Operating Income: $22,100

Annual Debt Service: $16,284

Positive Cash Flow: $5,816 (22,100 - 16,284)

CAP rate: 2.1% ($5,816 / $280,000)

Prop #2: 10 units in 1 building

Price: $229,000

Down Payment of $57,250 and Mortgage of $171,750

Annual Rental Income: $56,100

Annual Expenses (incl taxes, ins, mgmt fees): $29,903

Net Operating Income: $26,257

Annual Debt Service: $13,320

Positive Cash Flow: $12,937 (26,257 - 13,320)

CAP Rate: 5.6% ($12,937 / $229,000)

I'll obviously do a thorough inspection done of each building to uncover any capital construction needs or deferred maintenance problems.

Any thoughts? Suggestions? Anything I've overlooked?