Apartment complex in Lakewood, WA

[Pete M.]

Hi all,

Looking at 10-unit in Lakewood, WA, basically surrounded by the military base.  Split is seven 2/1s and three 1/1s.  Current rents gross to about $6k/mo, which seems way under market.  Could likely get $8800-$10k, based on rentometer averages.  The complex was built in 1968; pictures of inside look nice, but are also dated from 2004 (for inside), so who knows.  Asking price is $795,000, which I have a feeling is very high for the way-below-market rents.  Oh, and it's on an EPA Superfund site... but even then, rents seem to be way below market, even for other units in the same site.

I feel like it could work out great after doing some undetermined fixing-up and significant raises of rents, but both are also speculation, and I'm also loathe to give the seller money for value they're not going to do (and asking for a low cap, probably).

Anyone have thoughts on this property?  It'd be a pretty negative cash flow to start out, banking on the fact that it could be turned into a gem.  This seems a bit optimistic in my book, and I'm looking for a reality check on whether I should be laughing at this or jumping at it as quickly as possible.  My gut is saying to not pay sellers for value they're not delivering, but I'm not sure what's to be expected in the current market conditions.

What are expected cap rates for Lakewood, WA?  Any special considerations for the EPA Superfund site?  What kind of offer price would make sense (realizing they may blow it off)?

Thanks in advance.