Good Deal? - Tacoma 4-plex

[Ben Lukes]

Hi everyone.  I'm in the middle of closing on what would be my first property, a 4-plex in Tacoma...but the cash flow is looking pretty tight.  I'd love to hear your thoughts on it before I close.  Inspection has been paid for and may not be able to get the appraisal fee back, but I'd rather lose those than close on a bad deal.

• Purchase Price: $360,000
• 4-plex w/ (3) 2-bed/1-bath units and (1) 3-bed/1-bath unit
• Rents: 3-bed unit: $950, (2) 2-beds: $850, (1) 2-bed: $800 (month-to-month).  Total $3,450/month
• Landlord pays water/sewer/garbage (approx. $5k/year total)
• Property Taxes: $4,360/year
• Property Insurance: $2,212/year (waiting for second quote, hopefully lower)
• Maintenance/Turnover: assumed $4,000/year for all maintenance/CapX/turnover
• Management Fee: Assumed 10%.  Current manager charges 6%.  We will likely take over management after a couple months.
• Financing: FHA first time homebuyer loan (3.5% or possibly 5% down)

Units are not in great shape, but also not too bad, and are basically at market rent ($850 for the 2-beds, $950 for the 3-bed).  Seller agreed to repair roof, replace all water heaters, and some other minor repairs to one of the units.  The utilities are really killing the cashflow (I would charge a utility fee to tenants if possible as soon as the leases expire).  I'm also concerned that $4,000/year for all repairs, CapX, etc. might be too low.  Finally, putting only 3.5% or 5% down and paying mortgage insurance is really hurting cashflow, but I don't have the money for a 25%+ down payment.

Is this a good deal?  Does anything look out of whack?  Please let me know if there is any information you need that I missed.

Thanks!

[Catherine German]

@Rudy Manna the areas with a bunch of 4 plexes are hard to rent and just all around yucky for lack of a better term. You are better off finding a triplex or duplex in an area with all houses and maybe a business or two.

I have a 4plex in S. Hill that is in a great neighborhood and I'm having trouble renting one of the units. 4 plexes are tricky to rent sometimes especially if there is no garage.