[Calc Review] Help me analyze this Multi-fam deal in El Paso TX

[David de Luna]

View report

*This link comes directly from our calculators, based on information input by the member who posted.

I met a very nice lady, unfortunately with a terminal disease, looking to begin liquidating holdings. She has not listed her property. She is open to seller financing. She confirmed with me what I already knew - her rents are $150 - $200 below market. She renovated all units with kitchen, bath, hardwood floors; tenants pay all utilities. She pays only $200 for both common area water and garbage. Obviously I put in my own real numbers for expenses. The numbers show I'm making a whopping $28 cash flow based on the report. I few things to consider....

- I'm in NorCal but my brother-in-law, an El Paso real estate investor, and property mgr will manage. He confirmed the tight rental market and believes we can quickly replace any tenants unwilling to pay market rate. 

- Market rates will add $1000 to rental income, making the end result about $130 cash flow per door, and a Cash on Cash ROI of $20%+ after factoring in 6 units each one month unoccupied due to swap out of tenants. One remaining tenant is Section 8 and paying market rate now.

- I am thinking of offering her 10% down at full price, 5% amortized over 30 years with a 10-year balloon. Not sure she'd be interested in that long of a balloon but I've never done this kind of deal before and I'm scared that when the balloon comes due the property won't appraise for enough to refi the payoff. Should I be asking to get an appraisal? Maybe so. If it comes in low I might get her to come down on price. 

- I'm factoring $9900 (3%) for property taxes but the owner pays $2900 (owned for 31 years so that explains that, right?). She vigorously disagreed with my $9900 property tax estimate. What say you?

- I was prepared to invest $60k+ in El Paso on a deal like this so for this little down, I can cover the first year vacancies required to get the rents to market rates so I'm not sweating the low cash flow coming into the deal. I see a clear path to 20% CoCROI and $1000 monthly cash flow. Or what am I missing here?

- I don't know what I'm doing. I'm just making this up as I go along. What might a good seller financed deal look like here? (I currently own my own home and a duplex so it's the part about seller financing that I'm ignorant of). 

As you can see, I could really use some counsel on this.