Would you take this offer on a MF near the University of Arizona?

[Jim Garrett]

I purchased a terrific BRRR opportunity multifamily within walking distance of the University of Arizona in Tucson, AZ 11 months ago for $385,000 with $70,000 down. Seller carried the $315,000 interest only note at 6.875% with a 3 year stop. We renovated multiple units ($24,000 renovation costs), negotiated good lease extensions with rent increases for some existing tenants and drove down costs by self-managing and reducing the landlord paid water bill. The end result was an $800/month increase to gross rents and approximately $300/month reduction in operating costs, yielding just over $11,000/year in increased NOI to $35,784. It's currently generating just under $1000/month of cash flow after debt service. In January, comps in area sold at 6.5% CAP so we listed it at that CAP rate. I just received an offer at 7% CAP, which equates to $50,000 less than our asking. Normally I would negotiate hard for more, but a lot is different today than when we hit the market pre-Covid. I have 4 big issues in play that are giving me some heartburn. (1) The University, which is THE dirver of tenant demand and rent price increase in the area has announced large layoffs and may not resume on-campus classes until 2021. (2) As a small commercial MF it is not eligible for conventional residential financing and I'm being told that the portfolio commercial lending market is dried up from the market crash so my pool of potential buyers is much smaller right now. (3) The potential dip in values due to the economic fallout of covid-19 this year (if it happens) would likely not give enough time to recover to today's offer price before the balloon payment comes due. (4) The structure was built about 90 years ago. Much has been updated and is in great shape, but old properties just make me nervous.

What would you do?  Take the profit, cash out and wait to buy the dip?  Hold it for now?  

Would love your thoughts.  Jim