14 Unit Complex Analysis

[Peter Amico]

Hi all- 

I am looking at a 14 unit property and here is a link to the listing. (http://www.loopnet.com/Listing/20404304/415-e-Magn...)

This is more of an academic exercise as I am currently buying 3/2 SFRs, but I want to think about how to value multi-unit apartment buildings. However, here is how I think about it and wondered if others had more advice on a better way to value the property. 

Property appears to have quite a bit of deferred maintenance and the capital expenditures over the past few years seem to bear that out as well. 

Asking price: 1.1 million

-14 units (mix of mostly 2/1.5s). You can see unit mix at link. Gross Rents= 104K

-Taxes= 8,700 in 2016

-Insurance- 13,500

-Repairs/Maintenance (6%)- 6,200

-Capital Expenditure more in early years (10%)- 10,400

-Management (8%)- 8,320

-Water/Garbage- 4,250

-Debt Financing (assuming 20% down)- 880k/20 year/5%- 70k- Should this be different assumptions? I dont know much about term/rates on commercial loans. 

-NOI= 104k- 8700-13,500- 6,200- 8,320- 4,250= 63,030

-Cash Flow Before Tax- 63,030- 70k- 10,400k (capex) = -17,400k 

-Cap Rate= 63,030/1.1 million= 5.73%

Am I evaluating this correctly, or am I totally missing something? I cant see any world where this property cash flows at anywhere close to the asking price? For cap rate of 9%, the price comes down to 700k. I think I can make those numbers work. Then debt financing goes to 44k.  So Cash flow before tax goes to 63030- 44k-10,400 (capex)= 8,630. I would still not be wild about this deal at those numbers. That means 140k of my money is returning, before tax, 8,630 (6%). Also, that is at a much lower price than the asking price. What types of cap rate should I be looking for on  these types of properties? Do these not cash flow well? Any feedback is welcome. What am I missing here?