Just closed on 4-plex, offer accepted on 12 unit!

[James Lusk]

Hey everyone. My wife and I just closed on our first 4-plex and in the week after closing, have gotten an offer accepted on a 12 unit in Lakewood. Everyone here was so helpful with our 4-plex analysis so I thought I'd throw out our 12 unit deal to get your thoughts and opinions.

Asking price was $625k, our offer went in at $550k and was accepted. Apparently we could have gone lower. We will see what comes of the inspection and negotiate further according to the results. We are doing this deal with very little money out of pocket as we have found a partner who is just looking to make a decent return on their capital that has been lying in the bank being eaten away by appreciation. The partner is family which of course comes with certain risks but we are all of the same mindset going into this investment, with the understanding that no returns are guaranteed. Everything will be spelled out in our operating agreement that will be finalized this week. Any particular advice in regards to partnering/family would be appreciated.

The property is located just off of I5 by JBLM in between I5 and American Lake. The structure was built in 1958, and is on septic. This would be our first go around with septic. Has anyone had experience with a multifamily on septic? I am a little concerned about the care that tenants will take to not flush certain unwanted items down the toilets.

All 12 units are 1/1 500sf. Currently, the rents range from $375-525. I have not yet received the P&L statement to verify the current rent roll. The cap rate for the area has been a bit hard to pin down as not much multifamily has sold in the area within the last year. It seems to be in the 6-7 range. At a 6 cap, the purchase price should be right around $600k assuming a current NOI of $35,624.

In speaking with numerous local property managers and some local investors, as well as combing through available 1/1 apartments for rent, I have come up with $600-625 a month being market rent. It may take a little bit to get the units up to market but the property should still be cash flowing in the mean time. Once we get the units all at market rates, we should be looking at 1800-2000k a month cash flow. Here is a link to my breakdown of the numbers after rents have been raised. Let me know if any red flags come up and any local knowledge to the Lakewood area would be greatly appreciated. Thanks in advance!

https://www.biggerpockets.com/buy_and_hold_results/222193.pdf

Let me know if there are any issues viewing this analysis