Any advice for a deal which fails the 2% rule?

[Marty Gold]

a close friend approached me yesterday with a possible rental deal.  He knew I was in the process of finding my first property and he asked if I'd join him on this deal.  We went over the numbers, some are based on last year's data and some are estimations.  I will lay it all out below and hope people can offer advice.   It's my first deal and while this one passes the 1% rule(barely), it doesn't pass the 2% rule so that gives me pause.

Facts or numbers based on last year:

Purchase price is $182k (didn't yet negotiate). I should say, this is a rental in a college town and a rental for students(6 bed - 2 bath).  It's about 8 blocks from campus and 2-3 from some popular bars.  It is already rented next year.  I saw pictures of a few properties he visited, this one isn't very updated but by far nicer than the other 5 he showed me.  We may want to paint a little or something but there isn't much needed for renovations. 

$1,100 annual property taxes. 

$250 insurance.  

$24,000 annual rental income, rented a year at a time with $12,000 paid before the fall semester and $12,000 upfront for spring.  

Estimated numbers which we hope are accurate or too high:

4.3% 30 year mortgage for 80% of the purchase price. 

$9,000 closing costs. 

$1,500 per year in repairs/maintenance. 

$3,600 per year for electric/water/sewage (they pay heat/cable)

$400 put aside each year for future capital expenditures (should this be higher?)

That's it. 

We aren't sure about hiring a management company but we will obtain pricing and then make a decision. 

We also didn't know how to factor vacancy rate.  The two story home rents for $12,000 per semester and can sleep 6, but if only 5 students live there the rent is still $12,000.   Also the $12,000 is paid in a lump sum twice per year, not monthly.  What do you suggest we do to error on a conservative side?

Thank you to anyone willing to help crunch these numbers or offer advice!

[Jay Hinrichs]

student housing will cost you far more than your thinking.. on turnover and cap ex.  only place that would not be true is student housing at Brigham Young.