First time investor presented with opportunity of 5 rentals w/ cash flow

[Account Closed]

All:

I am new to real estate investing.  I am an attorney by trade (and will be begin an MBA in the spring).  Through my connections, I have been presented with an opportunity, and I would like anyone's input.

Here are the basic numbers:

Subject properties: 5 rental properties 1) 2/1 with flooring, paint, and bath updated ($500/mo), (2) 3/1 completely renovated $650/mo, (3) 1/1 completed renovated ($350/mo), (4) 2/1 fenced-in backyard and garage ($650/mo), (5) 2/1 $650/mo

Asking Price: $189,000

Gross Rent: $2,800/ month

Operating Expenses: (1) Taxes $133/mo (2) Insurance- $133/mo, (3) Mortgage (maybe $800/mo), (4) property manager $280/mo

Total Operating Income: $1,346/mo

Although the rental income does not satisfy the 2% rule, it seems, based on the numbers, that the rentals would cash flow?

My questions:

1) Should I consider it?

2) If so, how do I know how much to keep in reserves in the event of an issue? I understand there is a 50% rule, but does this include taxes, insurance, mortgage, etc?  I am thinking 25% of my total rent.

Thanks for your help!

[Joe Villeneuve]

Originally posted by @Joseph Ball:

Doesn't meet my rule:"Must return ALL of my investment within 5 years." $16,152/year doesn't even pay out in ten years. (Not everyone follows my rule. LOL).

As a beginning investor, start small. If you make a mistake, it will be a small one.

Good luck!

 Doesn't meet my rule either.  All of my money back in 1 year.  Also, I don't like to see the words " (3) Mortgage (maybe $800/mo),".  Either it is, or it isn't.  Someone stated the taxes looked low.  They don't to me, but the basis of that question (was it an estimate or the actual taxes) is valid.

When you know the actual numbers, and you analyze based on them, you don't need to use any arbitrary 2%, 50%, etc...rules.