Tip toeing into larger multi-family-Please help w/ deal analysis!

[Doug Olsen]

Hello BP world,

I've got several single, duplexes,  mixed use commercial, and a couple of 4 units and I'm finally taking a first step towards larger multi-family deals.  I'm hoping this is the next step towards a goal of much larger multi-family and would love some reassurance on the deal!  Any input is appreciated.

I cold-called a for rent sign and owner finally called me back (took 4 calls over about a year!).  Seller has scaled to larger units (150+ units) and this property is outside of his local range so the property management has slipped and vacancies are increasing.  They have a hard time showing potential tenants and coordinating contractors so apartments are sitting too long un-rented.  Income in 2016 = $78k, 2017 = $75K, 2018 = $63K.  For reference the area is the 2nd fastest growing county in the state and vacancies are in the 2-3% range due to a lack of building stock.  Property located across from a park near a school in the center of town. There's also a 24 unit up the street that may be next if this works out...

Deal:

*Price $480k.  WIll require 20-25% down but seller offering $50k financing @8% w/ 15 year term and ballon pay at 5 years

*12-units rented @ $675 per apt.  (local area puts these more appropriately at $725-$750/apartment as-is)

* 2 brick buildings built in 1970, separated utilities, W/D hookups, central heat/air, no major upcoming CAP EX other than minor parking lot repairs

* Expenses around $8k per year for trash, landscape, snow removal

*Taxes currently $4300, will raise to $13000/year after purchase

* Insurance $3,200/year

* 10% assumed maintenance/Cap ex @ $810/mo

*10% property management 

* 5% assumed vacancy @ $405/mo (growth region w/ high demand actually averages around 2-3%)

With my financing that I think I'll get (20% down for 30 years at 6.25%) here's my calcs:

*Current rents = 20% COC return, with $1700/mo cash flow

*$725/unit rents = 25% COC return, with $2,140/mo cash flow

Thoughts?  I feel like it's a very solid deal, just hoping for any outside advice or opinions to help.  Thanks in advance!

Doug