Seal the Deal or No Deal

[Jenny Billings]

HI

I'm new here to BP and loving all the info and advice. 

I currently own 3 rental properties in Salt Lake County Utah (townhouse, duplex, condo) and I am looking into bigger and bolder RE. I am under contract on a 6 plex in Price Utah and need some advice.

After crunching the numbers fairly conservatively I come up with an annual cash flow of 7,896. this is an average ROI of 20%! WHOA right? I've run several different scenarios and I cannot get this looking worse than 2% ROI and that's with a 36% vacancy rate which would mean this town had gone ghostal.

This number includes all management and maintenance being done by a property manager. So basically I sit back and collect a few extra hundred bucks a month from my office 100 miles away. 

Here is where I'm stuck.....This particular area has a not so diverse economy. Their main source of income and jobs is in coal mines and other natural resources. They are the county seat of that area but that's not saying much. The population is about 8400 and staying steady. Employment comes from either the mines, government, a local extension of a College University or a local hospital. This town has not suffered a lot of economic downfalls or hardships, but has not and does not grow very quickly. I expect to gain very little if any appreciation on the property. 

Annual Cash Flow

$ 7,896

[Bob B.]

Are the current tenants miners, hospital staff or government workers?  Everyone has assumed that because there is a mine in town that the tenants are a bunch of roughnecks. 

So what if the economy tanks in 5 years?  You'll be ok. 

I saw a survey the other day that said 99.99% of Americans given the option will always choose to live in-doors and that number is not expected to change. 

You say 20% return and you know what you are talking about.  Don't over analyze the deal.  Sounds like a good deal to me.