Good Deal or Bad Deal?

[Ralph Miller]

Hi guys, so I actually started viewing some properties this week. Came across this 4 plex and would be interested in hearing what you all think:

Gross rental income $ 3,425 

Monthly Expenses: Mortgage (25% down) $1,240

Property Tax $9,600/12= $800

Insurance $ 1,800/12 = $150

Water+Gas+Electric (common), scavenger =  $$585 

Repairs 5% x $3,425 = $171.25

CapEx 10% x $3,425 = $342.50

Vacancy 6% x $3,425 = $205.50

Misc. Expenses 5% x$3,425 = $171.25

Total Monthly Expenses: $3,665.50

Monthly Cash Flow: negative $240.50

Seller is asking $344,000 but will go down to $325,000. My agent thinks that's a good deal, my take: not even close! Am I doing this right? Missing something? Am I crazy? Am I exaggerating, being to strict in my calculations? oh, one more thing: I assumed I'd be doing grass and snow myself. Thank you in advance for your input.  

[Jake Hartnett]

Those taxes though!

Is there any way to reduce that? In my area this would be just a regular bad deal if the taxes were $4000, but this is an awful deal with $10,000 in taxes.

You also aren't accounting for management. I use 8%. Also, get a quote on lawn and snow and pay that to yourself. No cheating.

Are those rents at market rate, even with you paying the utilities? Would you be able to charge the utilities back to the tenants and keep the rents the same? What about trash?

I would be skeptical of this even if the tenants paid utilities and the taxes were $4000.

First rule about real estate agents (not mine of course) "Agents lie." Their incentives are not aligned with yours. They get paid if you buy, doesn't matter if its a terrible deal, and they get paid more if you over pay. Trust the numbers.

The other numbers look reasonable, but I don't know your market specifically.