6-Plex Analysis

[Tara Kinney]

Okay - so here goes.  I have two single family home rental properties that I am selling because they aren't cash-flowing and am looking at using the equity and a 1031 exchange to possibly get into some mulit-family housing.  

So I found a property - that looks to be structurally sound (all brick) 6-plex.  Very small - I believe all efficiency or one bed-room. 

I did an analysis on the property using some conservative figures and the numbers look good.  However the property itself looks like a slum.  

Purchase price is listed at $139K, the 6 units all rent for mid $500s.  The highest for $599.  5 of the 6 units are rented with new one year leases and all tenants have agreed to forfeit their deposit.  The 6th unit is currently being remodeled - with laminent wood floors and stainless steel appliances.  Looking at the 6th unit, I'm shocked they are getting $500's for rent on these units as I wouldn't think they wouldn't go over $400-$450.  (Efficiency).

Income: $525 *6 = $3150 (conservative as the owner says mid $500's and one going for $599.)

Monthly expenses

Cap Ex - 5% $160

Repairs 5% $160

Insurance - $75

Taxes - $210

Trash - $60

Snow/Lawn - $100

Water/Sewer - $150

Gas - $100

Property Management (11%) - $355

Vacancy - 7% - $225

Mortgage - P&I - $470

NOI = $1100 (monthly) - Annually ($13000)

(rough figures - but all rounded conservatively) - Downpayment 20% would be $28000 - so $13000/$28000 = 46% cash on cash ROI.

My questions are: 

1. Is there anything I am missing here in my analysis.  Seems to be well worth it from the money perspective.

2. When figuring repairs - should I be using 5% PER UNIT or just $5% of the gross rents?

3. I have no intentions on managing the property myself - I would have a property management company to handle it for me... so based on that - even though in my standards it seems to be a slum, would you purchase it anyway because the numbers work?