Small apartment complex - is this a bad deal?

[Travis Kubota]

Hi Everyone,

My first post!  I'm excited and humbled, hope to learn from all of you and contribute as much as I can as well toward group growth!  

I'm looking at my first apt complex, price at $825k.  3 units:

1. unit 1:  1 Br, 1 BA, 450 sq ft rents at $1400

2. unit 2:  2 Br, 1 BA, 805 sq ft rents at $1,800

3. unit 3:  2 Br, 1 BA, 805 sq ft rents at $1,500

If I put 20% down I estimate my monthly payments for debt servicing at $3,150. Assuming 50% of gross rents for cost/vacancy that would leave me at $28,200 NOI annually but $37,812 for debt servicing resulting in a loss of $9,612 per year. In other words a losing deal and a pass.

I've got a couple of questions:

1. I wanted to run that analysis by this group of gurus to see if I'm missing anything?  This is a bad deal as is correct?

2. If I was going to make the owner an offer, how would i back into the price?  I played with my excel model a bit and even at $550k purchase price I'd only be cash flow positive of $3,000 annually.  Any other suggestions?

3. Cap rate for this property is about 4.1%.  The other properties within my area all have a similar cap rate, would this mean that in order to purchase a small apartment in my area I'm banking on building appreciation, rent growth and since I've heard "you make your money when you buy" that they're all not worth doing?

Thank you so much in advance for your thoughts.  Hope to help everyone here as well.

travis