Need Help Evaluating a Small Apartment Complex

[Brad Gibson]

I'd like to get some help evaluating a small apartment complex deal.  

Some context first.  This would be my first foray into multi-family investing, so I don't know what I don't know yet. I know that apartments are valued by cap rate, but I'm not sure how to figure that as well as the financing for a deal like this one.  Just looking to learn before I leap.

Here are the facts:

Small building with 12 efficiency units.  Would be considered a C property in a part of town that is on the edge of rough and nice.  The building is at 100% occupancy with rents at $450 per month and were just raised in the last 6 months from $400.  Utilities are included in the rent & have run between $800 to $1000 depending upon the outside temperature.

6 units have been redone with six that have yet to be completed.  The current owner has been doing the re-dos as a tenant leaves.  Their rehab of a unit generally runs $700 at most for new appliances, flooring, paint, etc.

The common areas, landscaping, and exterior have been upgraded and re-worked in the last six months.  The building isn't on the market currently.  My current property manager and his brothers bought the building 6 months ago and have done the rehab.  I mentioned to him that I've been looking to start with multi-family a couple months ago and he indicated they want to free up some cash and thought this could be a possibility.

It sounds like they bought this from someone looking to get out.  Have begun rehabbing the building and units to raise the rent and now are looking to turn it.

Thanks in advance for any guidance and help in analyzing the deal.