First Multi-family under contract

[Kurt Winsley]

Hi all,

Still a newbie on the forums, but working hard at getting into investing...we are currently working on our first multi-family deal and I wanted to get some thoughts on how it looks to you more experienced investors:

We currently have this under contract at $595,000.

1. One three bedroom single family home (currently the on-site manager's residence)

2. 18 - 2/1 town-home style units with electric heat, washer dryer hookup, tenant-provided window A/C units. Electric is metered individually, water/sewer is master-metered. Set up as three units per building, six buildings total.

Currently 100% occupied, town-homes are $490-500/mo. House is $700/mo and manager receives $400/mo to manage. He does most maintenance, keeps the place in order and fills vacancies. Current manager has been there since around Dec 2014.

The units are in good shape physically, there are a few minor maintenance issues that I noted on my walkthrough, but overall not bad.

Average income for the last 5 years was not as high as would have been expected, running about $75k avg, with expenses $73k. Compared to the 44 units we have in the family portfolio, this seems like a dismal return that doesn't make sense unless it was not managed well and vacancies were way too high. Currently, they are reporting 50k for this year so far, so it is on a much better track income-wise since the new manager came on board. I don't have expense info for this year, however. The bank is not excited about this deal considering the previous track record of income.

Are we missing anything on this deal? When I run the numbers on some of the investment worksheets I found through the forum, I have a 9% CAP rate and a 14% cash on cash.

Thanks for the help!

Kurt Winsley