Buying 10 single family homes portfolio

[Lauryn Meadows]

Hello!

So I'm looking into purchasing 10 houses from one owner. These houses are small (7 have 1 bedroom 1 bath/ 2 have 2 bedrooms and 1 bath/ 1 has 3 bed rooms and 1 bath/ all are around 1000 sq ft or smaller.) My husband and I are really wanting to get into multi family investing, and while this isn't a multi family complex it is an opportunity for us to jump start our real estate portfolio. 7 of the units are HUD (section 8)/ tenants pay their own utilities. 100% occupied. Do not know the terms or length of the leases. Here are the numbers.

10 Houses

Asking price: $269,000

(These are numbers he gave me)

Gross monthly rent: $4,524

Annual gross rent: $59,388

Taxes: $4,640.54

Insurance: $4,168.00

Total of Annual expenses: $8,808.54

NOI: $50,579.46

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Loan with bank portfolio lender:

-20 year commercial loan

-No balloon payment

-Interest rate: 4.75%

-Interest barring every 5 years at a 2% cap on interest rates

-20% down payment ($53,980)

-Estimated monthly payment: $1754

-Annual amortization $21,048

----- it may be worth noting that we have $20,000 cash for this but will have to take the other $30,000 out of my husbands annuity retirement account which would inevitably lower the cash flow for us personally but we haven't called the financial planner to see what those payments look like. We do plan on doing that this week.

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NOI- loan payment is:

$50,579.46-$21,048= $29,531.46

Cash return= $29,531.46/ 12 months

= $2,460.95/ month

-$460.94 cap ex

=$2,000/ month cash flow / 10= $200/ unit

So looking at this, it is close to an 18% cap, and close to a 50% cash on cash return. This is in a small area in eastern Kentucky so it's normal for cap rates to be around 13-15%. Also, this deal has been on the MLS for 3 years so I'm a little worried to numbers look too good to be true. Of course, I'm going to try to talk down the price to increase returns but assuming the deal "as is" what are your thoughts? What else should I be doing in the due diligence stage in order to make sure my numbers are correct? Can I renegotiate the HUD (section 8) rental income to increase that revenue?

Any thoughts, suggestions, words of wisdom are welcome! This is the first buy and hold deal that we are really wanting to tackle. We are currently working on our first flip house as well, but end strategy is buy and hold. The flip business is strictly to fund buy and hold deals.

Thanks for any and all advice!!