Deal Analysis - 4Plex

[Snehann Kapnadak]

Hi Everyone, hope all is well. Wanted to get your thoughts on this deal, based on the following terms:

My goal (caveat): 1st MFH deal, looking fora stabilized asset for moderate cash flow. Not looking to do any major value adds and I'm okay with getting moderate returns.

Market: Kansas City, MO

Offer Price: 200,000

ARV, per Seller's financials: 215,000

Income

Gross Rent: $36,600, assuming full occupancy although 1 unit is currently vacant

Vacancy Rate: 25% (I know this is high but it's accounting for 1/4 units being vacant)

Effective Gross Income: $27,450

Expenses

Taxes (from seller): $1,674

Insurance (from seller): $1,434

Lawn Care (from seller): $400

Trash (from seller): 900

Electric (from seller):1,620

Water and Sewer (from seller): $3,356

Legal (my assumption) 1,000

Property Management (my assumption): $2,745 conservatively underwriting to 10%, but will try to negotiate to hopefully 6-7%

Total Expenses: $13,129 (~48% of Gross Income)

NOI: $14,321

Interest Rate: 5.5%

Loan Term: 30 Years

Down payment: 25%

Cap rate: 7.16%

CoC: 6.04%

DCR: 1.4

Plan: Hold for 10 years, Refi in year 6 or 7. Rent increases ~2% per year.

Average Annual Return with Refi: 16.02%

IRR with Refi: 16.02%

Where are my mistakes and where am I not being conservative enough? Thank you in advance for your comments.