8 Unit Deal Analysis - Would you buy this?

[Justine Ade]

Hey everyone! I was wondering if I could get some opinions with seasoned investors on this deal. The numbers look great if I have everything in correctly (my only questions are property insurance, rehab costs but everything else is pretty much confirmed). 

My biggest concern is the fact that this building is in a small town - the upside is that it is only 30 minutes away from a large metropolitan area and 20 minutes away from a medium sized town from the other side. Would this concern you?

The property: 8 unit Multifamily building. 1b/1b each side rented for $650 each . All occupied except for 1 vacant unit . All tenants are paying as far as we know. Utilities are not billed back to tenants but have separate meters.

Location: small town of 14000 people but like I said, 30 minutes from a large metropolitan area, 15min away from a Kroger grocery store, 20 minutes away from another medium size town on the other side

Listing price: $350,000.

Closing costs: $14,000 (includes agent commission, wholesale deal)

Repairs: $30,000 (very rough estimate)

Financing 75% of purchase price = $262000 . Interest rate of 4.0% Am. Over 20 years, 5 yr balloon. Down Payment of $87500

Total Acquisition Cost = $87500 + $30000 + $14000 = $131500

Gross income: $5200 / month

Monthly Expenses:

PM at 9% = $421

Leasing fees = $433

Maintenance at 10% = $520

Monthly Utilities (currently paid by owner) = $750-1000

Property taxes $267

Insurance = $250

Principal and Interest = $1585

Vacancy at 10% = $520

TOTAL expenses = $4996

CASH FLOW = $5200 – 4996 = $203 / month = $2436 a year

CoC Return without utility billback = 2% ($2436 / $131500)

If I bill back utilities the CoC return would be 10% and would look like this:

Gross Income: $5200

Expenses: $3996

Cash Flow: $1204 = $14,448 per year

Coc Return = $14,448 / $131500 = 11%

What do you guys think? Does the location concern you even though most of the units are currently rented with long term tenants?

Sorry for the long post. Appreciate any nuggets of wisdom!