32 Unit Apartment Complex: Is this a deal you would do?

[John Suralik]

Hi Fellow BPers, 

I was looking for some feed back about valuing this 32 unit apartment complex. I feel comfortable analyzing SFH, but I want to learn more about multifamily. So is this a deal you would do, and if not, what would need to change for you to be a buyer. It is a stand alone complex in a B- neighborhood. It is currently 100% occupied (which lacks a "get them all rented" value-add) It has the same owner since the mid eighties and rents are lower than comps. He is renting them for $515 for the single bedrooms and $550 for the two bedroom apartments, which is 50-75$ below market from doing a market analysis of surrounding apartments. My hypothesis is that there could be a magic middle between new units a mile down the street that rent for 1050$ for a 900 sqft two bedroom, and the $550 two bedrooms in this complex with a little upgrading.

I had a meeting with the commercial loan officer, and he said that they typically only loan 65% LTV to newbies-to-apartment-complexes and that he would consider the owner carrying a note for 10% of the purchase price as debt, so I'm pretty much out, but would like to get your feedback. Also, the spreadsheet above uses a 30 amortization, but the lender said 20 years is standard, but the confusing thing is their website says 30yr and 40yr amortization is available. I didn't asked him to clarify before leaving. So where would you have to be to be a buyer.