Trying to grow into Multi-Family

[Shawn Singh]

Hello everyone,

I am an investor and current have a portfolio of 3 residential properties (1-4 unit) that I have purchased leveraging the BRRRR strategy. They have been successful thus far, however I have been looking to accelerate my growth by focusing my efforts on larger multi family properties.

My agent brought the following property to me as a value add deal - I've been trying to run the numbers, however I'm not sure if there is something I am either missing, or maybe I am correct and this deal just doesn't work.

8 units

Asking: $850k

Gross Income: $97k

NOI: $52k

Cap Rate: ~6%

I believe that after updating kitchens / bath / flooring (assuming $12-14k per unit, at total of $100k), we can raise rents for a projected rent roll of $113k, resulting in an NOI of $69k (assuming expenses don't increase).

Now, with those numbers, I thought this should have been a good deal, however after running numbers at 25% down (for both purchase and post rehab refinance at a 6 cap), I'm resulting in cash flow numbers that are below $500.

Can someone review the above info and tell me if there's something that I'm missing when it comes to running numbers?  It's my first time venturing into the commercial multi-family space (5+ unit), so genuinely not sure if I'm even running the numbers correctly. 

Thanks for the help in advance!