Help on a potential deal... my first multi-family

[Josh Layhue]

I'll try to keep this as concise as possible. There are two "houses" being sold together. One is a duplex and the other is a 3-unit (2 downstairs side-by-side and 1 upstairs). The houses are next door to each other. It is a bank foreclosure that I've walked through and it is in decent shape. It needs carpet, paint and other superficial work... and lots of cleaning. I'm going to have a contractor/construction friend of mine walk through it to check for structural problems. Now for the numbers. I was told that the units were bringing in $425 per month. I'm working on verifying those now.

Asking price: $64,900
Annual gross rent: $24,000 (assuming $400/unit)
Annual expenses: $12,000 (using 50% rule)
NOI: $12,000
Down payment: $13,000 (a little over 20%)
Loan amount: $51,900
Interest rate: 7% (In my area, we can easily get 7% with 20% down)
Length of loan: 10 years (operating as LLC, so probably have to do 10 years)
Annual debt coverage: $7,236
Net income: $12,000 - $7,236 = $4,764

I believe these numbers to be conservative. The properties probably need $10,000 worth of work and the real estate agent made it VERY clear that the bank would accept less than $64,900.

Does this seem like a reasonable deal? What else do I need to know before making an offer?

Thanks in advance for your help!