Would you do this deal?

[Dee Y.]

Would you do this deal for 4 full duplexes:

Asking: $241K
Sales/Offer: $220K + $40K rehab = $260K ($32.5 each)
Monthly rent: $650 (average)
Monthly estimated expenses: $1,325 (including taxes and insurance)
PI: $957 monthly (30 year, 5.75%, $164K, 25% down)

My calculations:

2% - Must generate $5,200/month Actual: $5,200 (gross)
50% - $2,600 Estimated: $1,325

Annual Return based on est. expenses = $30.2K, 30.2% or $299 per door
Annual Return based on 50% rule = $16.5K, 17.4% or $172 per door

I tried to do all estimates on the high side (especially rehab costs). Rent for 4 units is actually $700 (larger units) but I estimated on low side.

Questions:

1. Would you do this deal? Estimated expenses are lower because I will be managing.

2. I have a fully paid for property valued at approximately $300K which realizes only about 8% return (my first purchase which was a total learning experience.) Would you get financing on this property and make a cash offer at a lower amount? There are 2 more properties in this group that should be available in the near future. One is already foreclosed on but not on the market. This would leave me with more cash if I pull out almost enough to cover purchase and rehab.

3. What rate of return do you expect to get on your investments?

Please feel free to make ANY comments. I’ve done the numbers using the guidelines on this site, and in several on-line calculators and they all show that this is a good cash flow property. However, this is a lot of cash out of pocket.

Thanks.