Help me Analysis this deal!

[Wilson Lee]

My husband and I are in the greater Birmingham market.  We found this property and are preparing to make an offer.  The listing agent is sending us rent rolls and all other documents they have right now.  We have asked the owners if they would owner finance and they said yes depending on the terms.  What offer should I make them? What risk am I not seeing? Will this make my family money? 

Property

54 Worthington Dr # 15, Woodstock, AL 35188 <-  Link to Redfin

4 2bed/1bath for 524 and 1bed/1bath for 485. 

Concerns

The 5plex property is located 20 minuets away from any shopping or dinning.  It is rural. there is a farms and national parks on the same road.  It seems to be the only rental property in the area.  I drove around and could not find a for rent sign.  Online I can't find any past rent postings for nearby homes on Craigslist, Hot Pads and others.  

2 units are vacant, We could move in to one if we wished.

"The" Numbers

Annual Gross Rent are 31020. Asking Price of 185000. Down payment 17500  

What should I offer?  Below are cost if I pay 185,000 for it.  I get about $105 per door.  My estimates are very high on expenses.  There are no comps.

Expenses

Monthly PITI payment $1078.28 This is derived from a 360 month term at 4.5% interest. Property Tax of $1348. Insurance of $1350 this is a blind estimate quote pending. Wells Fargo has per-approved us at 4.275% interest last month.

Maintenance 4000 annual. estimated as 2% +500,  I feel this is a high estimate. 

Vacancy rates are unknown in the area and are estimated at 8% annual for $2481.60

Property Management for the future, if we ever need it, is $2853.84 annual

Repairs and CapEx

The duplex has a new roof put on 7 years ago and looks good.  The triplex's roof is 31 years old and has been repaired over the years. Currently there are 4 10x10 feet areas that need roof patching.   the floors in 2 units need new carpet and paint now.  The HVAC are 2 tons for each unit and are less than 7 years old.   5 4x8 patches of dry wall need to replaced.   3 water heaters are less than 4 years old, 2 are about 8 years old. The stoves, fridge and dishwashers are all about 5 years old.  No pluming issues are seen.

Data is form a onsite inspection last week.  I report on damages on ROE to banks for a living.

Schools

The school scores 6/10 on GreatSchools.org compared to the lower scoring neighboring areas 2/10 and 4/10.

[Clayton Mobley]

@Wilson Lee Welcome to BP! While MFRs aren't my personal area of expertise, I have to say my gut on this one is that you're trying to make it work when it doesn't. Especially now that you know there's a mold issue, likely needs a new roof, new flooring, and likely other deferred maintenance issues due to a neglectful landlord, it just sounds like this is going to be way more trouble than its worth. For the amount of money you're looking to put down (especially once you factor in these costly repairs) you could have a couple turnkey SFRs cash flowing without any hands-on from you. 

Of course, you might like the hands-on aspect, so Turnkey might not be up your alley, but this property still seems like its a bit too much to bite off for your first go 'round. You've mentioned its rural, which isn't necessarily bad. However, while a lot of people in AL like living in rural areas they typically go the SF route (we have luck in areas like Pinson, Graysville, Trussville etc). I took a look at Google Earth, and the street actually looks quite nice, though I couldn't actually see the property in question. However, the fact that its far from shopping centers means your tenant pool will be smaller than if you invested in a more accessible area. There is the upside in terms of location, which is proximity to Vance and the Mercedes plant. Outside of Mercedes employees, however, your limited in terms of employment options in that area. 

The proximity to one great employer aside, you said annual rents are just over $31k for a 5-unit prop, that puts monthly per-unit rent at just over $500. Honestly you can do better, with less work.

You could likely drive down the price, but then you need to ask yourself if you have the time and energy to devote to the substantial rehab this place requires? If you're looking to create passive rental income, or even active rental income, I think there's easier ways.

Of course, you know more about this property than I do, and there may be things I don't see. I would advise you, like I do all new investors, not to force something to work just because you're anxious to get in the game. You don't need to wait for the perfect investment, but if a property keeps throwing up red flags or is going to require more of your time and money than you can reasonably commit, it's better to wait a little longer than to pull the trigger on something that will weigh you down.

Best of luck!

Clayton