Four-Plex Advice Please

[David Neman]

Hello, what a great forum this is. I have a question about a property that's available in my area and whether it sounds like a good deal or not.

It's a 5,283 square foot four-plex in southeast Texas. The lot size is 35,000 square feet, and both of the one story duplexes were built in 2004 and have attached two-car garages. They look to be in pretty good shape. The units are directly next to an elementary school, and the property is one of the only multi-family units in the area. Other properties are single family houses and trailers in a fairly rural area. The area is quiet and low crime, and I think will become a little more popular over the next few years due to urban sprawl and some colleges, restaurants, etc being built a few miles down the freeway. Everything is kept up and many of the surrounding houses are ranch style with some acreage and quite expensive - others a little less.

Here are the numbers according to the realtor:

Asking price is $374,000

The unit is fully occupied and generates $3,275 in monthly gross rental income

2015 Taxes were $7,953

2015 Insurance was $1,296

All utilities paid by tenants

I want to live in one of the units, so my gross income from the remaining units would be about $2,456.

I'm budgeting 8% for vacancy of the remaining 3 units

I feel like the asking price of this property is high compared to the amount of rent it brings in, but that's why I am here asking for advice. I've read that operating expenses should be budgeted at 40% of gross monthly rental income, however this seems high to me as well.

Does this seem like an ok deal on the surface or should I be looking for something with a better ratio of rental income to purchase price? I know I'll have to pay for things like trash and landscaping, and I would like to probably increase the insurance coverage a little which will further add to the expenses. What else am I missing?

Thanks a bunch for any replies!