First deal analysis, fourplex

[Account Closed]

I really appreciate the help from everyone!

I'm looking at a property here in Austin. It's in a low-income neighborhood, which is the biggest concern of mine. I would not assume any good appreciation on the property.

The 4 units are all rented, all month-to-month.

I'm getting a good rate on a conventional loan with 25% down.

I'm assuming these expenses:

10% vacancy

15% maintenance & repairs

$85/mo for lawn maintenance and misc

Property taxes based on 2012 records (plus some for appreciation)

Insurance based on rate quote

PM cost of 8%, with estimate of 2 new leases (at cost of 80% of month rent).

These all boil down to a 55.47% of gross income expenses (more than the 50% rule).

So these numbers are based on above expenses, with and without PM:

Cash on Cash: 5.35% / 9.15%

Total ROI: 9.2% / 13.0 %

Cap Rate: 6.44% / 7.48%

GRM: 7.69 / 7.69

Debt Coverage Ratio: 1.3 / 1.5

Break Even Ratio: 0.80 / 0.73

Since it's about an hr from where I live, and in a bad neighborhood, I was considering using a PM.

There was talk about the rents being raised, but I probably should not consider that at all in my analysis.

Any thoughts / comments / suggestions?

Thanks!

Brandon

[Jeff Clawson]

The rent to purchase price is about as good as your going to get in Austin right now in the current market. However, I would look for a property in a better area with a lower vacancy rate and lower property management fees that will increase your overall cash flow and return.