Overcoming FEAR! Analysing my first deal (Off Market)

[Jeremy Marek]

Hi Guys,

I have been looking around at various deals for months now and I think I found an off market deal that might be a good investment. I am having a difficult time overcoming the fear of overpaying or loosing my shirt on my first property. ESPECIALLY since this is off market, it makes me nervous, because why wouldn't the owner list it?  This property is in a southern suburb of Chicago (not a war zone). Most would consider it to be a B- to C area. It has been stable for years, but the area does not have stellar appreciation. I think the prices keep up with inflation, but not much more than that. Building is in pretty good shape and doesn't currently need much work. Building is fully occupied.

Here are the numbers:

6 Unit Building Asking Price: $300k

(All 6 units are 2BR 1BA)

Total monthly rent (Assuming full occupancy): $4720

Average monthly income from owned coin laundry:$75

Yearly income: $57,540 - 5% vacancy($2,877)= $54,663

Total income after vacancy: $54,663

Expenses (Yearly):

Property Tax: $15,000 (Cook County)

Insurance: $2,000

Water: $2,100

Gas (Currently landlord pays for baseboard heating, water heater and gas stoves. Units do NOT have individual gas meters):$4,500

Garbage:$500

Common area electric:$625

Town rental fee:$150

Management (Although I will do mgmt myself, my time is still worth something): $2,000

Total Yearly Expenses: $26,875

NOI: $27,788

CAP: 9.25%

Does this seem like a pretty solid deal? This property would have to be mortgaged, so after taking out a loan on the property, I don't think I would get more than about $6,000/year cash flow and a 25% down payment would mean I would tie up $75k + 10k(closing costs and other fees)=$85k. So my cash on cash would be 7%.

Would you say I am overpaying? Any of my numbers seem off? I feel that I need a pretty strong Cap and Cash on cash return because the area is not expected to appreciate, so the money I have in on the property REALLY needs to cash flow. Again, I am also nervous that the seller doesn't have the property listed. I just got wind of it through my realtor. I would think the smart thing for the seller would be to list the property to get the best purchase price.