Is this multifamily a pig?

[James Free]

Ben Leybovich has written plenty about the folly of investing in pigs (https://www.biggerpockets.com/renewsblog/2015/03/0...).

I am wondering if the deal below qualifies. It certainly does on purchase price, and perhaps neighborhood, but the multifamily aspect makes the prospective rent so absurd that it might be a good deal anyway.

Purchase price: $40,000

Taxes: $600/year

Units: Three 2/1 units

Market rent: $550/unit

Even with a generous capex budget, you can find a lot of room for cash flow when you're getting 4% rent/value ratio. Suppose repair/capex is 40% of rent? Fine, throw in 10% for vacancy and 20% for taxes/insurance/water and I'm STILL cash flowing over 10% on my $40,000 investment.

I understand that the key to this is actually getting tenants at $550/month, but if the market seems to support that, can a pig not be a pig?

[Daniel O.]

Is it a pig, or is it bacon?  You really need to dig into this thing more than you have here. What is the property like? Does it have serious deferred maintenance issues? Are there factors that will deter tenants? Most things that look too good to be true usually are. But some of them are bacon.