Deal Review: Need help with 12 units please!

[Bruce Turner]

Hi eveyrone, I'm new to apartments so would love some input on the following deal:

2- 6 plex units with 2 bed/1 bath that appear to be in excellent condition with no deferred maintenance.  Located at the end of a culdesac within a subdivision.  All units on this street are multifamily, with most being duplexes.

I'm told owners need to sell and are motivated due to divorce and one of them is out of state now.

Current rents avg $525 and can be pushed to $540 and in fact a few have already been stepped up to that.  Owner would not provide schedule E but rather provided the following breakdown:

Potential purchase price is $450K

Potential Income at current rents: $75780

Expense:
Taxes: $6456
Insurance: $3300
Night Light: $348
Dumpster: $2136
Snow Removal: $1330
Lawn Mowing: $1044

I added:
Vacancy Rate at 10%: $7578
Repairs/Cap X at 10%: $7578

Leaves us with $46010 NOI

I can get a 20% down/300 month loan with a 5 year adjustable rate at 3.99% at a local bank I've done commercial loans with before.  Brings us to the following:

$46010 NOI
-$22778.71 Mortgage Pmt
$23232.00 /90,000 Down Payment for a 26% cash on cash return

Please look my numbers over and let me know if you think they need tweaking and if this is a good deal.  Also I wonder about buying in a subdivision with multiple landlords on the same street and if that turns into a wild west scenario.  The street is clean and it's a nice, nothing that concerns me at present with regards to the appearance.

I should add that these are located about 7 minutes from my house so it's very convenient for me.

[Joseph Gozlan]

I'd factor in property management. Even if you plan on doing it yourself, the next person to buy it will factor it as well or maybe you'll get to the point (hopefully) where you have too many units and need to hire a PM to handle some of the load.

Also, try shopping around the neighborhood. if the entire street is small MF, call available units pretending to be an interested renter and ask for the rents, terms, concessions, how long it's been on the market, etc.  This should give you a better feel of rents & capex in the area.

Overall seems like a good deal, just make sure you cover your bases and can sustain the property even if it takes longer to rent a vacant unit.