Would you do this deal?

[Zoran M.]

Hi all – just about to sign on the dotted line and wanted to get your take on the property listed below. This is actually just one of a few properties that I’m purchasing in Cleveland from an off-market portfolio, but the numbers are largely the same. The property is located in a B+ neighborhood and is close to two universities and the Cleveland Clinic.

The cap rate is great, but i'd be interested to hear if others are demanding more sizable cap rates in Midwestern towns. 

Purchase Price: $83,000

Annual Rent: $19,200 ($1,600/mo)

Vacancy @ 8%: ($1,536)

Gross Income: $17,664

Taxes: $2,633

Insurance $441

Maintenance @ 8%: 1,766

Utilities: $500 (tenants cover ALL utilities, but figured I’d add it in there)

NOI: $12,325

Debt Service: $3,648

Cash Flow: $8,675

15.4% Cap Rate

[Brian Sealey]

On the CAP rate discussion: Personally I like to look at the Cash-on-Cash return. If I place x in to purchasing a property what rate of return will I get on my cash? Property B may cost less but if I can buy Property A with zero down and $10,000 in repair and make 12% I'm happy. To me it depends on your goal. I want long time cash flow so I can relax one day ????