Good deal?

Hi Charlene dont for get a second morgage to the first morgage( like maybe 80%for the(1st),(20%) for the 2nd), owner financing( for secong morgage or all )for period of time, maybe owner would do a lease option for a period of time think out of the "norm, be creative"see what the owner is willing do , YOUNG LADY, youll never know what can be done till you "ASK", much success, Jim ( you can do this!!!!!!!) ( maybe a "BRIDGE LOAN" for a period of time )

Rent minus taxes and insurance leaves you with $20,000 to service the debt , allow for maintenance, vacancy and management. $249k @ 5.5% for 30 years is about $1400/mo for principal and interest. Rent minus taxes and insurance is about 1666 a month coming in, so that leaves you with $226 to cover maintenan+ce, vacancy, and management. The national apartment vacancy rste is 4.2%. We'll user that for the sake of discussion, and that amounts to about $100 month. Now you have $126 to cover maintenance and management. If you do the management yourself, that leaves you with $126/mo for maintenance reserves. Depending on the age of the property, what condition is plumbing, electrical, heating, roof, etc. $126/mo would give you about $1500/yr for maintenance reserve. That doesn't account for landscaping in the summer or snow removal in the winter. So at this point, the deal seems a little thin to me. What I see at first is, you have 6 units averaging about $400/month in a town of 2300 with a median income of $76,000. That's a few people making a lot of money. Who are your likely tenants going to be at $400/month? Will they be able to pay the rent and how long is it likely they will be a tenant? Will this lead to a lot of vacancies and turnover? After considering those questions, as James said, you could see if the owner would carry back a second mortgage of 40% and get a new first for 60%. You'd have to get creative and ask for no interest on the second to help with the cash flow and maybe ask for no payments on the second mortgage from the seller for the first year to build up your reserves. But this is all predicated on having a motivated seller. The reason for selling will give you a little more insight into what kind of a deal you could structure. Hope this helps. Just my opinion and I may be wrong.

I know they tell us to not buy prop buy n hold unless you have 100k in the bank, because like TRSD(I dont know or dont remember your name:) you should NOT buy n hold prop. Because what happens if the furnaces go out for this building, they trash it(tenants) the plumbing goes out & you dont have the $ to replace them.

So I would say wholesale it, but you have to do the #'s like TRSD said above, and see if it is a deal at the price they want. Get comps fr a realtor, run your#'s & see. It's all in the book by Dean 30 Days to RE Cash & no he is not paying me to write that ha.

Hey from the numbers you provided the deal looks good but like Tony mentioned above, Matt Larson says no one should buy and hold unless you have $100K cold cash in the bank. I'm guessing thats for any reason your properties need work done you can afford to fix them. You can wholesale this deal or ask the seller if they would consider doing a lease option, or find a private money lender to partner up on you with the deal where they would get more of the deal because their taking all the risk on the property.

When analyzing a Cash Flow deal, use the acronym TIMMUR.
Taxes
Insurance
Management
Maintenance Reserves
Utilities
Reserve for Vacancy and Rental Loss

Annual rent collected is $30,597/yr... Is that NET INCOME after expenses? If that's just the rent collected before expenses, this deal is HORRIBLE.

I'm a Cash Flow investor, if you find an apartment where the net is 15%, let me know! It was nice seeing you at the Edge!

This is why I love DG

Information and helpful insight thanks for all the contributions and to the original poster

Thank you all for your advice on my previous potential.
You all confirmed my suspensions. I am just too eager to get my first deal, my judgment is cloudy.

Thank you all again

NEW OFFER - different owner & town
7 units may be able to get it for $175,000. All currently rented gross rents $4150. other income from laundry & garages = $6600 TOTAL GROSS RECEIPTS = $48100 owners pays gas & water = 7000/yr, taxes @ 1740/yr, ins @ 1740/yr, this is in MT largest city. Building needs cosmetic TLC on outside, all apts are good as is except for one - it will need quite a lot of cleanup/repair. I fount 70% of purchase @ 8.5% and $65000(bal & fix-up)@ 4%. We will manage it our self and do most of the fix up. Roof, furnace good, not sure about water heaters.

I think this is too lean as well right?