First deal! 7 unit complex, input needed!

[James Rodgers]

Hi everyone, 

I am really excited about this property. It popped up on my Trulia feed, I called for information, and the owner, who is also the listing agent, called me back this afternoon. It seems like a great deal. I have been looking for a 2-4 unit MFR to owner-occupy, but I think I will just do a conventional loan on this one and not live in it. I have been learning about residential investing and wasn't planning on going commercial yet, so I'm asking for input as to what I might be missing, with it being "commercial," with it being my first deal... What should I be on the lookout for that could explain why this is such a good deal??

The property is 7 1/1 units close to Birmingham Southern College in Birmingham, AL. I am not too familiar with this particular neighborhood, but I would say it is a C- area. From my conversation with the owner today, each unit is occupied at $350/mo. The tenants have been there "some for 15 years," and "won't be looking to leave." They furnish all appliances and pay all utilities themselves. There is central heating, and cooling (not sure about cooling). It is a long, one-story building with off-street parking. I don't know about washer/dryer hookups, but I don't think there are any. 

It is listed at $100,000 and the price is firm. The owner said she is selling to finance a larger, 100-unit deal, and isn't open to carrying the note. 

Here's my analysis: 

INCOME:

7 units x $350 = $2450/mo

EXPENSES:

Mortage = $403/mo ($75k at 5% for 30 years)

Taxes = $90/mo

Insurance = $75/mo ???

Repairs & Maint. = $245/mo (8% of total rent)

CapX = $250/mo ??? (kinda educated guess)

PM = $245/mo (paying this to myself)

Vacancy = $123/mo (5% total rent)

Total Expenses = $1431/mo

Monthly Cash Flow = $1019

One last question I have, if it does look like a good deal to you: how do I go about raising rents/updating the property/modifying the contract terms if need be? She said they pay cash every month. I want to maximize this property's potential, and also manage it extremely efficiently, so I would think that I'll probably want to update the system they are used to, and maybe at some point improve the building to whatever extent. 

Thanks so much in advance, everyone! I love BP and and so thankful to have found it. 

James

[Bryan L.]

I didn't see any utilities in your expenses and you'll be looking at a commercial loan probably 5-10 year amortized at 20.  Just my two cents...