4-Plex Analysis: Fayetteville, NC

[Kerry Smith]

Hello everyone, we are considering a 4-plex in Fayetteville, NC. The property is in a "C+" class neighborhood, and I would feel comfortable living there with my wife and kids. The surrounding properties are all 3-4 plexes. We have labeled this as one of our target areas to purchase in, and this would be our initial foothold in the neighborhood. 

It is 15 minutes from one of the world's largest military bases in Ft. Bragg, and directly across the street from Methodist University. 

Here is the listing for the property:

http://www.realtor.com/realestateandhomes-detail/1...

The current asking price is $239,000. It was recently dropped from $255,000. Each unit currently rents for $650, which we feel is a little low based on market research. All units are separately metered, and the tenants pay all utilities. The roof was replaced two years ago, but the property does need some cosmetic rehab. The only additional expense is $120 a month in lawn care.

Seller is offering financing, but we have not discussed terms yet. We are considering offering $209,000 with a no down VA loan. We understand that this is not a "killer deal" by most standards, but numbers wise it is a starting point for discussion.

1. What are we forgetting?
2. How would you structure the seller financing if it was your deal?
3. How would your initial offer differ from ours? 

As always, thank you very much for your time and feedback!

Purchase Price: $209,000
Monthly Income: $2600
Monthly Expenses: $2348
Monthly Cash Flow: $251
NOI: $15,389
Cash-on-Cash ROI: Infinity
Cap Rate: 7.36%

Operating Expenses:
Vacancy (5%): $130
Repairs (10%): $260
Cap Ex (10%): $260
Management (10%): $260
Taxes: $217
Insurance: $70
P&I: $1030
Lawn Care: $120

VA Funding Fee: $6,897.00
Estimated Repairs: $5,000.00
Total Project Cost: $215,897.00
After Repair Value: $209,000.00 
Down Payment:$0 
Loan Amount:$215,897.00
Amortized Over: 30 years
Loan Interest Rate: 4.00%