Deal or no deal? What am I missing?

[Account Closed]

Hey everyone, 

I just put under contract a 2- flat building in the Chicago area. This is a class C neighborhood. Can you please give me some advice and criticize my analysis below? The first unit is renting for 700 (long term tenant). The second unit will be rehabbed. Each unit is about 850 SQ .

Are my numbers being conservative? There were very few comparables that I was able to find. And some of them were cash deals so I decided to value the deal using the cap rate formula. Please let me know what are your thoughts on this: 

Investment
Property	35,000.00
Rehab costs	20,000.00
Closing costs	2,500.00
Inspection	500.00	76,133.33
Total investment	58,000.00
ARV based on cap rate formula	76,133.33	Class C neighborhood: 12 % Cap rate, NOI: 9,136
Equity available	0.238178634	1-(b31/b33)

Income	Monthly	Yearly	Assumptions
Annual Gross Rent, first year	1,500.00	18,000.00	Unit 1 renting for 700. Unit 2 can rent for 800 based on market rentals
Vacancy	150.00	1,800.00	10 % vacancy rate
-
Operating Income	1,350.00	16,200.00
Expenses
Property Taxes	191.67	2,300.00	Based on cook county tax records from the last 3 years
Insurance	100.00	1,200.00	7 % (Need to do more research)
Management fees	135.00	1,620.00	10 % of operating income
Maintenance	94.50	1,134.00	7 % of operating income
Water	67.50	810.00	5% (need to do more research)
-
Operating expenses	588.67	7,064.00
Net performance
Net operating income	761.33	9,136.00
Debt service (Heloc 3.5 %)	175	2100	Heloc rate at 3.5 %
Cash Flow	586.33	7,036.00

[Brie Schmidt]

@Account Closed I think your expense calculations are pretty spot on (including water and insurance) 

That being said, valuing it using a cap rate when it is a 2 unit is not going to work. You really need to use comparable sold properties to determine the ARV. There is only 1 rehabbed 2 flat that sold in a year and it went for $146k