Analyzing a multifamily property in Kent, WA

[Jeff Dzado]

Hi everyone. I found an MLS-listed 12-plex in Kent, WA (listing says 12 bedrooms which suggests 6 units, but describes 2 buildings with 6 units each). The units are 2 bed, 1 bath. It is listed for $2.3M. Monthly rental income is listed as $11,860. This means $988/unit average. If the NOI numbers are to be believed ($51k/year), it is selling at a cap rate of 2.2.

I quickly looked at rentometer.com, and it suggests that average rents for a 2 bedroom unit is $1600+/month.

Is this a really good potential opportunity (especially in the Seattle area) to fix it up a bit (if needed), raise rents, season it for a while, and sell? An extra >$600/month/unit in rents seems a bit crazy to me as this might be closer to $150k/year NOI (again, need to look into the NOI a bit closer). Maybe it really is just that poorly managed?

[Brian Hughes]

Yes,  agreed.  Good access to a lot of decent middle class jobs is another plus for this site.   Its also in commute distance for seattle and bellevue,  though it would probably be an hour each way on a good day.  

Its a decent property with several possible dimensions of upside, but which is considerably overpriced.    Its been on the market a while (for this area anyway),  but probably not long enough that an offer low enough to make even a "real" 5% cap on year 1 likely.  

Given that there are a few properties of this scale for sale like this around the south seattle area (and a very well kept 16 unit in renton that I think didn't sell and the listing expired recently too)  all of which are similarly overpriced and havent sold instantly,   Its another sign that maybe things are peaking,  or at least stabilizing. 

I'm guessing any of these properties that have been competently managed and owned for a while are probably raking in the dough,  so unless the current owners are really needing the sale proceeds for something else they are probably perfectly happy waiting for somebody willing to pay their price.     And unfortunately at least for publicly listed properties,   being poorly managed and below market doesn't affect the asking price too much,  as they are all priced based on proforma numbers,   not actuals.