Analysis on Fourplex

[Bill W.]

Looking for feedback on this potential deal on a fourplex in my area.

Purchase price: $160,000

Gross rents: $2600 per month.

Principal + Interest: -$648. (20% down. 30 year fixed loan at 4.5%)

Expenses
Taxes: -$300
Insurance: -$125
PM (@10%): -$260
Vacancy (@8%): -$208
Repairs (@10%): -$260
Water: -$250
Total: -$1403

NOI: $2600 - 1403 = $1197

Cash Flow: $1197 - $648 = $549 per month

This is a fourplex in a rough Class C neighborhood. It is surrounded by other similar fourplexes. Rent seems to be in line with the neighborhood. The interiors of each unit were somewhat recently remodeled. This deal is strictly a cash flow deal and I would not expect any appreciation on this deal. Thoughts?

[Patrick L.]

Expanding on what Steve Babiak said, I would also figure higher than an 8% vacancy rate for a rough class C property, especially a multi family one. It could easily be double that or higher when you factor in evictions and people splitting after a month and a half. It's not one of those properties where people always stay until the end of the lease and worst case you have a month of vacancy while you turn it over. You will also have much higher repair costs between tenants in general.