4-plex analysis in rural Virginia

[Bryan McAlexander]

Hey guys. My name is Bryan and this is my first post on Bigger pockets! I listen to the podcast daily, and want to be more active in the forums. I've been studying real-estate investing for about 6 months now. I'm interested in small SFR and small multi-family. I thought it might be a good idea to get your take on a local deal. I live in a rural part of southern Va, and after searching, I've seen no activity on the forums about my area. On to the numbers!

*Note: The market here is cheap. Cheap prices and cheap rent.

Info about the property: 2500 sq. foot 4-unit apartment. All units are 2BR/1Ba. "B" neighborhood that I would have no problem living in. Built in 1974 with the exterior in great shape. Brick, with a new roof by the current owner. Interior looks to be in good shape as well, but looks like it hasn't been updated since it was built (wood panel walls, old carpet, old cabinets...etc.) Baseboard heat and the tenants supply their own window A/C units.

Price: $100k, owner stated he would take $95k

Rental income: $14,400/year ($300/unit per month, $1200/mo total)

Expenses per year (given to me by the owner): 

Maintenance: $400

Water/Sewer: $2880

Garbage pickup: $600

Taxes: $400

Insurance: $420

Total: $4700 (Avg. $392/mo)

Analysis: 

I would get a conventional 30-year 20% down loan, at lets say 4% interest. (Assuming cost will be $95k)

Mortgage P&I payment: $363/mo ($4356/year)

Rental Income - Mortgage - Expenses (per month)

$1200-$363-$392=$445 monthly cashflow

($445*12)/($20,000+$4356+$4700)=0.1838*100=18.38% Cash on cash ROI

Analysis using 50% rule:

Rental income - (Rental income/2) - Mortgage

$1200-$600-$363=$237 monthly cashflow

($237*12)/($20,000+$4356+$7200)=0.0901*100=9.01% Cash on cash ROI

The rent is undervalued for the property. I would immediately raise rent to $350, and eventually raise it to $375. After studying my market, I think $375 would still be closer to market rent ($400-$425) while still being considered a "deal" for the tenants. 

What are your thoughts on this property? I do realize that vacancy was not accounted for in the calculation. Do the owners expenses seem too low? Maintenance cost too low? Anything I'm missing? 

I really appreciate your input!!!

-Bryan