I was looking at a group of 4 fourplexes as a package deal. I had done my projections (yay! 50% rule) and things were looking good. Showed it to my lender, things were looking quite good. (yay!) Then, I get the seller's Sched E for the past two years, which has him at a whopping 73% expense ratio- yikes. So, basically, I am asking you more experienced folks if these numbers look likely. I understand the insurance, management, and taxes, those are what I expected- but the rest seem way high

Anyway, with a a gross annual rent of around 90k they are paying:

10% cleaning and maintenance
4% insurance
10% management
17% repairs
11% taxes
18% utilities (This is with 13 of the 16 units paying their own utilities, except water)
3% other (??)

These are basic brick, shingled roof fourplexes, built in 1976, w/ all electric utilities.

I can imagine three possible scenarios here.
1) The place is just a money pit (but why?)
2) The guy's getting soaked by his management
3)- the most awkward option!- he's being less than truthful w/ his Uncle Sam

anyway, this Schedule E probably blows my chance of financing this deal unless I can get it for less than half the asking price. But I am curious as to what you all might think and any suggestions that might come up about a way to proceed.

thanks!