Thoughts on this Potential Deal

[Stephen Chittenden]

Someone has brought me a potential deal.  It's a single-family home that has been renovated into 3 units.  Gross rent is $2300 per month.  Asking price is $150k with owner financing.  

Proposed deal:

$15k down

$135k purchase price

$15k loan payoff fee

Owner financing 1-yr balloon with 20-year amortization at 5.5%

Our PM charges us 8% of gross rent as a monthly fee.

The problem that I'm struggling with is that the units are not individually metered, and the rent includes all utilities.  I'm guessing $250-300 per month for electric and $75 per month for water/sewer, based on public information and experience.  In addition, the building uses oil heat.  The owner says that he fills the 280 gallon tank every 4-6 weeks during winter.  I'm concerned about the risk of runaway utility costs.  I'm not even sure with these assumptions, the deal makes sense.

The house is 115 years old, but is in good shape. It needs paint and carpet in two of the units, and one unit could use updated appliances. After the initial year, we would need to refinance it into a commercial mortgage (we own our properties through an LLC).

Thoughts?