Old House Converted to Five-plex

[Jeff Taylor]

I'm looking at an old home in a low-rent part of town. It's been converted to a 5 unit. 

Total rents = $2250/mo. 

They are asking $70,000. 

That seems great until I tell you that the landlord pays water, electricity, and gas. 

As I enter numbers in my spreadsheet, I find that everything depends on the monthly utility costs.

If utilities are $500 a month, the monthly cash flow is $494 with 27% ROI.

If utilities are $750 a month, the monthly cash flow is $245 with 14% ROI.

If utilities are $1000 a month, the monthly cash flow is -$5 with -0.3% ROI.

I have a call out to the current owner/listing agent about utility costs. I am starting to wonder if the owner wants to unload the property before summer hits and his tenants crank on their window A/C units.

Feedback is appreciated. Thank you.