Analysis Help - First Fourplex Purchase… What should I offer?

[Jennifer C.]

I am a newbie to anything other than single family and I need advice on analyzing a potential buy that I just saw this morning.  Here is a general summary:

- Fouplex built in 1920 in Maryland

- New siding, windows, gutters in last 3/4 years

- Roof in ok shape.  Plumbing and electrical seem ok.  More on all of these to be determined at inspection.

- No noticeable leak/plumbing issues (from visible inspection of each unit)

- 3 - 2 Bedrooms

- 1 - 1 Bedroom

- In a rough part of town so top rents are not an option for this place regardless of condition.  Rent could be raised some however and with reconditioning the inside they could be raised a little bit more 

- All units are currently rented and there is a good setup of automatic payment and none of them have been late on rent.  There are a range of tenant lengths:  several years, a couple of years and two less than a year.  She has very short time in between renting and re-renting because she has kept the rents relatively low.

- Inside needs works… Two of the 2BDR units need cosmetic overhaul… kitchens, baths, flooring, paint.  The other 2 units need mostly fresh paint, maybe upgraded kitchen/bathroom floor and upgrade bathroom vanities and toilets.  My contractor told me $20K - $30K to completely overhaul each 2 Bedroom.  This seems high to me but what do I know?

Numbers:

- 2016 Assessment $213,800

- Total Monthly Rents $3,380

- Tenants pay electric and water (baseboard heat)

- 2017 Taxes $2,800

- Current Insurance Paid $1420 which includes a $1M umbrella policy for any accidents etc… 

- Has Lead free certificate and has existing city certificate for inspection for rental properties

- No HOA

- How much should I build in per year per unit for expenses?  Including outside yard maintenance of $90 a month, I was thinking $10K total ($2500 per unit per year) just to make sure I am covered.

-   I would probably do a 30 year mortgage on it… I can put whatever amount down I need to.  Less is obviously better.  

My question is… what is the MAX I should pay and any ideas on a good strategy for the offer?  I have run different calculators and spreadsheets and I am getting hung up on improvement costs over time and how that will impact my overall investment return.  

The seller is an older woman who wants to get out of real estate… I know she is willing to cut a deal and she knows she is asking way too much for it.  

If I have to sink in $20K - 30K per unit to really upgrade them, I am having a hard time offering more than 300K at the very top end for these.  I would love to walk in with a firm $250K.  Am I crazy?

Appreciate any and all inputs.

Thanks!