Seeking advice on potential first deal - off market 6 unit apartment

[Travis Boyd]

Hi BP community! I'm looking for advice on whether I should purchase my father-in-law's 6 unit apartment in Burien, WA (10 minutes south of Seattle) as my first deal, or perhaps help find him a seller that would pay more than I could and is a couple years ahead of me in REI. My father-in-law told me he plans to sell his 6 unit condo building ASAP so he can "retire" from being a landlord. He has owned it for over 30 years and has no debt, so seller financing is possible and he doesn't need a large amount of cash soon. 4 of the 6 units have been recently updated. The units are being rented below market at around $1,700/unit, whereas market rent seems to be around $2,150/unit for these 2 br/1.5 ba units with laundry in each unit and undercover parking. I know a year ago an investor reached out and offered him $1.6m which he felt was a low-ball offer. I tried calculating value based on NOI and cap rate (see below) but I'm new to this and the value seems to come out lower than I would expect. I am considering offering him $1.8m with a low (or no) down payment and seller financing at a low interest rate so I can at least break even on cash flow after getting rent closer to market value and with upside potential as a MTR and strong appreciation opportunity. For context, before I learned about his 6 unit I was planning to purchase a 2-3 unit long term rental in Q1 2025 as my first of many deals with a 5 year goal of financial freedom so I can coach my daughter's high school cross country and track teams. I'm also considering finding a seller that would pay more than me to help my father-in-law out and perhaps get a wholesale commission that I could use on my next (ok, first) brrrr, but I'm not sure the best way to validate a fair price or know what a fair wholesale commission would be. I will be attending a real estate meet up tomorrow night in Seattle but would appreciate any advice before the meet up.

Some numbers:

Expected 2026 income after raising rents to market value and assuming 7% vacancy: $144k.

Expenses: $14k property management, $18k property tax, $10k insurance, $10k utilities, $8k in repairs/maintenance/advertising/admin/etc: Total operating expenses: $60k

NOI: $84k

Based on 6% cap rate that brings the valuation to only $1.4m, or $1.5m based on 5.5% cap rate. That seems like a way too low evaluation. My father-in-law is also considering creating an HOA and selling each unit as a condo for $350k which would be $2.1M. That sounds like a lot of work and I'm sure he would prefer to avoid that work and just sell it for $1.9m or $2.0m.

if I were to buy it from him, to get to cash flow neutral I would need to increase rent on all 6 units to market rates and my monthly payment would need to be close to $6.2k/month, which would be $100k down payment, $1.7m loan with seller financing at 2% interest rate and flexible ballon payment.

What would you do if you were me? 

Thanks!