Converting a 4 unit to 5 unit

[Anthony Deringer]

I am considering buying a deal with the following numbers (provided by the seller):

Current purchase price 309,000

Sq. Ft. Actual Monthly / Actual Yearly

Unit A 1000 / 12000

Unit B 775 / 9300

Unit C 885 / 10620

Unit D 575 / 6900

Total Rental Income 3235 / 38820

Vacancy (5%) 162 / 1941

Gross Income 3073 / 36879

Management (8%) 259 / 3106

Insurance (estimate) 100 / 1200

Maintenance (5%) 162 / 1941

miscellaneous grounds, well, septic 50 / 600

Taxes 384 / 4603

Total Expenses 954 / 11450

Net Income 2119 / 25429

Cap rate @309,000 = 8.50%

25% down 5.5%IR 30 AM 1273 / 15276

Cash Flow 846 / 10153

Cash on Cash (ROI) 13.50%

Currently the property has the four units listed above and it has a large unfinished garage.  My plan would be to add value to the property by spending 20-25k finishing the garage and adding another unit - most likely an efficiency ($575/month).  Most of the money from the added until would fall to the bottom line each month, but lets just say only half would become net income.  If I sold the property at an 8.5% cap rate it would make the property worth $339,000.  So my questions are:

1. Do these number look reasonable?  Anything you would add?

2. My understanding is that going from 4 unit to 5 until allows me to increase the value of the property based on cap rate.  Is this true?  Are there legal issues I should be considering when increasing from 4-5 units?

3.  Would you do this deal?

Thanks in advance for your thoughts!