Deal Analysis: Would you buy this?

[Trevor Dominique]

Hey BP,

Wanted to share the deal I am currently looking into purchasing and get your thoughts!

This is an 8 unit apartment building in a small midwestern town. The property was built in 1992, and each unit is about 600 square feet, 1 BR / 1BA. There is a decent amount of blue-collar manufacturing jobs in this town, so the assumption is that is the type of tenant I would be renting to...probably a single person who works a lot and just want a cheap/clean place to live. 

Purchase price (estimate): $370,000

Rehab: $80,000 (ultimately two of the eight units have been recently remodeled, but the remaining six units will need cosmetic updates. With the units being only 600 square feet, this $80,000 seems more than adequate.

Total Investment: $450,000

Monthly Rent: $4,800/month ($600/unit)

Monthly Expenses:

Vacancy: $144/month (3%)

Property Management: $400/month (Plan to self-manage but factoring an allowance here)

Maintenance: $400/month

Property Tax: $300/month

Insurance: $200/month

Water: $400/month

Misc/Other: $200/month

Annual Net Operating Income: $33,072

Total Investment: $450,000

Cap Rate: 7.35%

Annual Interest Expense: $13,950

Annual Profit: $19,122

Let me know your thoughts!