Advice on 2 fourplex buildings deal. Columbus, OH. I'm a newbie

[Jason Bausman]

I’m a newbie at all this but have been doing as much research as I can get into a 24hr period. Any advice, criticism, or just a plain run the hell away from this deal would be appreciated!

Property is 8 Units in 2 buildings. 2BD, 1 1/2 Baths, townhouse style built 1986

Approved for section 8. Currently 50% occupied. 4 units have just been renovated and are ready to rent. Not in a Class D war zone but more blue collar Class C. Property is located at the end of a cul de sac with a school 2 blocks away, surrounding neighborhood with SFH

Our first rental property-strategy is to buy and hold for 20 yrs

Purchase price 405K

Current Rent at 625/unit- potential to be raised to 675.

Commercial Loan

20 yr fixed at 5.2% 1point=324,000 loan

20% downpayment $81,000 financed through HELOC on personal home at 5.63- Rate seems high but to pull maximum potential from home we had to go at higher rate. We are left with approximately 20k for an emergency fund in HELOC

Expenses:

Repairs $250

Insurance $305

Property taxes $1028

Water,Sewer, Garbage $386

Mortgage $2174

HELOC payment $844 (we factored this in to be paid off in 10 years. Starting out we are calculating to only pay interest until property is stabilized. So initially this won't be 844 but we included it for long term)

Property management-self manage

Monthly income with all 8 units renting at $625=$5000

Monthly expenses $4987

NOI $26,243

Monthly cash flow $12.70

Cash on Cash ROI 0.17%

50% rule $325

2% rule =1.21%

I know initially this does not look like a good deal or great investment. I have not included vacancy or cap ex, which is suggested by bigger pockets but we do have emergency funds in place to cover anything big. However, once the HELOC is paid off and if I can boost rents to 675 per unit ASAP, would be an additional $400. All efforts would be made to pay off the HELOC and then the property would cash flow approximately 1200 per month.

Considerations:

We are in the Columbus Ohio market and multifamily homes seem to be going fast. There was an identical property next door that was on the market a few days before it was in contract but fell through due to some buyer financing. There were multiply offers on this property within a few days and will probably go fast. Within 24 hours the property we are considering purchasing already had multiple offers. Our offer came in slightly better and we are in contract waiting for inspection to be completed. My numbers for repair, insurance, water/sewer/garbage come directly from the sellers expense sheet. (I know may not always be that accurate). I have thought about trying to have water submetered to decrease expenses but unsure at this point how much it would cost or if possible.

This is our first rental.

Is there too much risk here?

What am I forgetting or should I include in my numbers not stated above?

Section 8. I have heard good and bad. We are going to be attending the Columbus Metro Housing Authority meeting for landlords this month for more info. Any tips?

Thanks for any input it is greatly appreciated!