First Large Multifamily Deal 70 Units...Help!

[Seth Hillenmeyer]

I want to start this discussion by introducing myself as a new RE investor in the multifamily space. Its important you understand my background to know about this deal. In the last 3 months I have gone from 0 units to 16 units (2 8 Plexes) with my other 2 partners. Both my partners are more experienced, one of them being a RE agent (helps me save on commission!) and owns 20 SFH. But neither have experience in large multifamily properties. Our first two deals were identical properties and purchased with hard money, we are currently in the process of rehabbing each unit and plan to refinance with the bank in 6 months (our minimum with our hard money lender). We were required to put 10% down by the hard money lender. Being a big fan of Grant Cardone (author of the 10x rule) we want to really grow and have now found what I think is a home run.

The deal is not currently listed on the open market and is held by a mom and pop investor who has owned it for the last 10 years but doesn't live in the area. It is 70 units (C-class) and we have negotiated a purchase price of $1.8M, the property appraised for $2.05M back in 2009. At the negotiated price the property, it would be a 12% Cap before any improvements (raising rents and charging for utility overages). We believe their are many inefficiencies and value add opportunities we could capitalize on. We have negotiated for the buyer to carry 7% of the purchase price and give us a cash reserve of $125k for deferred maintenance on the buildings. (the buildings need a new roof in the next few years). It is our idea to pledge this capital reserve account to the bank and in conjunction with the owner carrying 7% we could find ourselves needing to bring less than 5% to the table depending on the banks down payment requirements. Don't get me wrong this will be a challenge to manage, the area is not suited to appreciate and this would be a pure income play. We are familiar with the area and with my local business we could fill any vacancies with my staff. 

Please ask questions and let me know your thoughts. Are we biting off more than we can chew too soon or have we stumbled upon an incredible deal?!