URGENT! Deal analysis help...

[Yaya Y.]

looking at a 4 unit townhouse. up and coming(hipster) location. close to transportation. Not a lot of product in immediate area.

purchase price $820,000

renovation costs post purchase: around 350k

Total Monthly Rent: $7,000 (after renovation/ pro forma)
Annual Rent: 84,000

Vacancy: 5%

Total annual Expenses: 25,000

Annual Debt service: around 50k

cash down: 500k

all in costs: 1.2m

ANALYSIS:

My analysis is that I spend money and my time to achieve a 5 cap. I feel like I am buying a safe investment but not achieving a high yielding asset. If my math correct, my cash on cash is about 1.6%? Is that correct? cash flow is about 10k a year. Would you buy this asset and if yes, who so?

please let me know what other information I can provide. 

[Donald S.]

so real quick....1.2 Mil all in, what's the place worth after you rehab it? You said you're putting your time and money to achieve a 5 cap, but that means based on your numbers that the place will only be worth 1.2mil after rehab.  

Is this a long term loan you'd be using that has a construction loan tied to it, or are you putting 150k down to purchase and 350k cash to rehab to get to 500k cash? 

Is the 25k expenses including 5% vacancy? 

As for the "feel like I am buying a safe investment but not achieving a high yielding asset", well that's kind of how investments work, more risk=higher potential return (higher yield) the lower the risk generally = the lower return. 

As for 1.6% COC ROI, I see 84k-25k-50k=9k/500k=1.8%. Which seems really low to me. Is it worth 9k a year to you to invest 500k? IDK that's a personal decision.