Is this MF a good deal?

[Terry R.]

Total novice here. Was reading on the forums about the 2% rule. I would like to know what everyone feels would be the max offer on the following:

Location: DFW area
5-Plex
Asking Price = 270,000

Owners remarks: Each unit fully remodeled w/stoves, refrigerators, tile, cabinets, appliances, showers & plumbing in 2008. Roof replaced in 2006.

(2) - 2 bed/1 bath currently at $670 ea;
(2) - 1 bed/1 bath at $650 ea;
(1) - efficiency at $475.

$5000 in taxes per year
$200 per month in utilities for gas & water
$325 per month for electric

2% rule = $155,750

I know that the first thing I would do is stop paying utilities. There are 5 separate meters so I don't know why the owner is paying utilities. Water may make sense since the units are presumable small and there is just one central heat/water unit.

Thanks everyone for your thoughts!

[Jon Klaus]

In Garland you could buy 5 SFRs for $270K that rent for $850-$900 each.. They'd be easier to sell than the 5 unit when the time comes. A bit more management and maintenance, but the better investment in my opinion.

Of course there are other variables, but you should be able to do better. I buy mobile homes on acreage east of Dallas, pay an average of $30K, all in, and get rent of $800+ on average. If I bought apartments in Garland, I'd expect similar ratios. I'd pay a bit more in Richardson.