Brick 6-Plex Downtown - Is This a Good Deal?

[Lee Miles]

I've got a line on an off-market 6-Plex. It's currently fully rented, and the rents are much lower than market rents. 3 of the tenants are month-to-month and the other 3 are on a year lease. The sellers are aware of the low rents - claim they're keeping rents low so they don't go into a higher tax bracket... 

6-Plex consists of: 2- Studios / 3- 1BR / 1- 2BR. House is downtown, in a historic district. A nice and safe location. 

Current Rents: $2700/mo (I believe I can have rents up to $3200/mo within a year)

My quick analysis, (using $2700/mo for income), looks like this:

Asking Price: $165,000

10% down: $16,500

Payments @5%, 20yrs =  $980/mo

Operating Costs: $1080/mo (Gas, Electric, Water, Insurance, Taxes)

$2700/mo - Operating Costs: $1080 - Mortgage $980 = $640/mo Cash Flow

Cap Rate: 4.6% 

Am I missing anything in my analysis? 

If the analysis is solid, then this 6-Plex meets the $100/door rule. The Cap Rate isn't great. However, when rents are brought up to market value, the monthly cash flow will be around $1140, which is getting close to $200/door and the Cap Rate would be 8%.

The sellers bought the house on contract and have a couple years of payments left. They feel strongly about their asking price, but they are willing to sell to me on contract. (I'm told the original owner is fine with this, as he just wants paid off, and will be paid off via this deal). 

The sellers are getting on in years and they do not want to be in the landlording business any longer. In fact, they've told me emphatically that they no longer want this house. 

The house is assessed by the county at $125,000. Typically homes sell for close to their assessed value around here. Like any other buyer, I'd much rather pay $125K than $165K. Not sure if they'll budge on the asking price - they say they paid $165K 14 years ago, and they want that amount back.

I'm going to see the inside of the house on Monday, but I've walked the property and the exterior is in good shape, aside from maybe $500 in brick work. Assuming all is well on the interior, I may decide to make an offer.

My motivations: I'd like to push for a lower down payment - as low as possible. I'd rather pay closer to $125K than $165K. And I'd like to keep my mortgage payment under $1000/mo. 

Seems like their motivations are the sales price and simply getting out of the landlording business. They are extremely motivated to do so. 

Any advice on how to structure a deal that makes us both happy?

Thanks in advance!