Newbie looking for help on analyzing Deal

[Sean Illman]

Looking for advice on this property 

7 unit which needs to be converted back to 5 as city only allows it to be zoned 5 unit. 4 units and a small commercial space (hair salon)

currently set up as  1- 3 bedroom  1- hair salon   5 bach

would convert to 1- 3bedroom  1 hair salon   1 -bach      1- 2 bedroom  and 1-1 bedroom(possibly 2 bedroom) 

Asking price $199,000

current Rental income 7 units 

1 3bedroom $1000

1hair salon $600

 5 bach  $500 

rental $4100

after  convert to 5 units 

1- 3 bedroom $1200 

1 hair salon $ 600

1 bach 500

1- 2 bedroom  $850

1- 1bedroom $700

rental income $3850    less money but has to be done to abide by city 

total $46,200

expenses based   from the 7 unit  last year   could be little  lower with less units  

power $6700

property tax $7400

water 1950 

garbage $1000

repairs $ 2540 

insurance $3500

vacancy rate $385 (10%) 

total   $27710

mortgage  on $150,000  - $850  -$10,200

total  $37910

income 46,200 

 net income  +8,209 before repayment of $50,000 downpayment back to my line of credit    $833  based on repaying back in 6 years ( is this normal practice?)  would like to payback before have enough equity to refinance   $833  -  $9996   

which then would bring net income to  $ -1706 

How can I make this property work? 

also that is not including $15000 that would need to be put into building to make the units right. 

any advice is greatly appreciated 

[Roy N.]

Originally posted by @Sean Illman:

reduction of purchase price by $30,000 ? 

You a buying a business (cash flow), not a building.  If the cash flow is 24% less than advertised, then it would follow you would pay somewhere around 24% less for the business ... which is closer to $48K