Posted by William Bronchick on May 19, 2000 at 09:51:15:
With low-end mutlifamily, you need to figure on 1/2 of the gross rent going to every BUT debt service. Thus, $4600/year will go to taxes, insurance, utilities, management, legal, repairs, etc. That leaves $4600/year for debt service - p&i payments. On a 15 year land contract @10%, your p&I payment would be about $350/month or $4200/year. So, at worst, you would be looking at break-even with nothing invested and paid off in 15 years.
Unless the place is a real disaster or in an area that is unpopulated, it looks good on paper. Capitalization means nothing, but based no my figures, I see about 13% rate.
If he wants money down (I doubt it), offer to do repairs or improvements in lieu of a down payment.