7.5 Cap 10 Plex purchase/ Am I missing something?

[Aaron Gilbert]

I am looking at purchasing a 10 plex. It is in a solid C+/B- neighborhood. The only issues I have with the building/ neighborhood are a flat roof ( which was replaced in '16) and the house across the street is vacant and boarded up. Other than that it is a solid neighborhood and the building is purpose built. I have bought rented and sold 1 SFH and looking to move into smaller multi family.

It is currently over priced but in talking with my property manager, he said it will end up selling at 7.5 cap. The problem is it will only cash flow at $75/unit per month at that purchase price. There is some up side though. Current monthly rents total $5,711 but with the current condition of the units and market rents, that could be up to $6,000 by the end of the year. That coupled with the current owner is paying for all utilities which could be put on RUBS or sub metered. That would save close to 14K in expenses figuring I could bill out 90% of the utilities to tenants.

After rents are up to market and utilities sub metered, I could refi and pull out 100% of my money and cash flow $120 per door. Option #2 refi and pull out my money plus another 78k and cash flow $75/mo. 

Am I missing something? Seems like a solid deal if I can pull all my money back out and have a cash flowing property. Is it okay to cash flow a little less on the purchase knowing i'll make it up in short order? Thank you for your help.