This Seems Like a Winner: What Say You, BP?

[Andrew Taylor]

I'm closing in on my first REI deal, and I think I found myself a doozy.

• Sales price $2.6m
• 20% DP = $520k
• Closing Costs = ~$39k
• Loan Amount = $2.119m
• GSI = $385,095
• Gross Income = $365,840
• Expenses = $140,778
• NOI = $225,062
• CAP = 8.66%
• COC = 13.88%
• Total ROI = 41%
• Cash Flow = $77,589/yr

I've included allowances for vacancy and maintenance at 6% of rents, and the actual property management fees paid in FY 2015. Vacancy is currently 0; unit is near a university, and the university has signed 2-year leases for 100% of the units (severe housing shortage in area). Maintenance is expected to be low as current owner was also the builder (units are only a few years old) and has lived on-site handling issues as they arise.

Current owners are also getting ready to do significant CapEx - roofs, exterior paint, landscaping, etc. They run a local charity and are just good samaritans as far as I can tell (spent an hour or so on the phone earlier today).

What am I missing here?