Thank you @Don Spafford and @Guifre Mora for explaining. I did more analysis of these locations and here it is:
1. Market rent per unit I assume will be $1,600 per month. These properties have mix of 1 and 2 bed units.
2. Taking into account very low vacancy rate for the area which is around 3% I can assume that I will be able to rent out all units. The expected annual revenue per unit then will be around $20K and total annual revenue for 4 units will be $80K.
3. Annual expenses per unit will be around $10K, which includes all taxes, insurance, administrative and maintenance. And total annual expenses will be $40K.
4. Looking at the similar multi-family properties that were sold recently I can see that average price per unit should be $210K. And total price will be then $840K. Actually listed asking price is higher but using this market data I would assume I should get down to this price.
5. Going with these numbers the cap rate should be ($20K - $10K) / $210K = 5%. Is this considered an OK cap rate?
