I assume this is a 4-plex, although you don't explicitly state that. You want to spend around $60,000 a unit, including purchase and renovation costs, for $800 a month rent per unit. That's 1.33 percent per month. The two percent rule generally applies to multi-units, so you are light on the rent based on the rule of thumb. I probably am not interested in this deal, unless there is something I'm missing about the property or your market.
First, how did you arrive at your rehab costs? Are you a contractor or do you have experience estimating renovation costs? Did you have a contractor look at the property and give you a bid? A lot of the profit is made when you buy, so it's very important you have an accurate idea of the renovation costs.
Second, how did you arrive at the rent? Is this what the current tenants are paying? Is the place occupied or is it vacant because it needs these repairs? Are the rents estimated from comparable rents in the neighborhood? Are the comparable rentals similar to what your units will look like when the repairs are finished? Are rents in the area stable, rising, or falling? What about property values? Are they on the upswing?
Third, what's the occupancy in the area? Are there a lot of vacant units or is there a waiting list at every building? What kind of neighborhood is the property in? Is it a stable, middle class area, or is it a warzone? Your expenses depend on how often the units turn over and how hard your tenants are on the property.
Fourth, where do you get your expense estimates? In particular, where did you derive the maintenance and repair estimates? You can check taxes on-line or call the taxing jurisdiction and you can get a quote for insurance, but repairs and maintenance are trickier. Never, ever rely on a pro-forma provided by the seller. Sellers and their agents are, ummm, optimistic about the future. If you can, get the seller's tax return schedule for several years to verify the stated expenses.
Fifth, if the property is vacant, you will have to carry it until it is renovated and occupied. How long will the renovations and lease-up take? Have you factored in the carrying costs?
Finally, what are the mortgage terms?
As I said, on the surface, I don't like this deal. I'm willing to be persuaded if you can answer all these questions in a way that convinces me you have a good deal and you are prepared to take the project on.
