4-plex analysis

[Daniel Jordan]

Looking in my area for a good investment deal to start out with. It appears that there are several 4-plexes running for around $150k that have been on the market for 6 months or better.

These are 2-bed 1-bath, and should bring $500 per month.

Purchase price: $140,000
Closing Costs: $5,000
Downpayment: $28,000
Loan amount: $112,000
Rate: 5%
Term: 30 years
Payment: $601
50% of rents: $1,000
Cash flow: $399
Cash flow/unit $99.75
Yearly cash flow: $4,788
Cash on cash return: 14.5%

Asumming I can negotiate for a $140K purchase, using the quick and dirty 50% rule that would leave $1,000 to service the mortgage payment with $399 cash flow or $99.75 per unit. All the above looks good and reasonable to me. Am I missing something? Why wouldn't these have been purchased already? I should mention that they not located in horrible areas, but they are in lower income areas.

Any insight is greatly appreciated.