Looking for Feedback on my analysis of a 4-unit Property

[Jack Barkow]

Hello BP!

As I'm still getting more into things I'm starting to look at properties and ask myself (why hasn't someone already scooped this up?).  With that said I wanted to run one such deal by the community for further feedback to see if I'm missing something that wouldn't be immediately apparent without visiting the property.  So with that said here are the details:

2400 sqft 4bd 4 ba 4-unit property (all 1 bedroom units).  All  four units currently rented.  Listing price of 90k. 

This unit is not in a particularly great area, but that said it is 2 blocks from the city police station and 1 block from the city hospital as well as some nice places to go out to eat/for drinks in walking distance.

I'm estimating a rent price of 500-700 a month and using the 2k per month as the low ball for evaluating this piece of real estate.  

County records show this property was sold in 11/2015 for 50k.  For tax purposes this property is valued at 57.6k.  I'm not sure of the exact tax burden for this property.

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Expenses are as follow:

Taxes 2k annually (Just guessing here)

10% Property Management Costs (I'm excluding any placement fees at the moment)

8.3% Vacancy Rate

$800 Insurance Annually (I have never had property insurance so this could be way off)

$1200 for Misc Repairs

12%($2600) of income for Variable Cost PM Work

30YR Fixed Mortage @ 5% Interest & 20% Down= ~$400/mo

I'm neglecting to include any costs for mowing the lawn as needed

I will also need to purchase an umbrella policy for myself, which would cut into the returns on this property to some extent.

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All of that said I'm calculating a 14% cap rate and 40% COC. Cash flowing almost 11k annually. Am I missing anything major on this initial look? Maybe the owner is paying utilities right now or the home isn't set up for individual metering (I could change leases to be collective on water/sewer/elec in the future). Maybe this unit needs some serious work (its fully rented though so depending that would be one unit at a time and maybe not for some months/years depending on tenant history). Maybe I'm seriously overestimating the rents (I would have to ask the broker about the current leases and tenant history anyway so that can be verified)? Is there another issue that I could be missing that makes this go from a winner to a loser?