Jasmine, I congratulate you on stepping out into the world of multifamily. Due diligence and good property management are your keys to success. If you are serious about pursuing a deal like this, get in touch with some professional property managers. I am not talking about an agent that manages property on the side (no offense) but professionals that do this full time and are experienced both in property type and area. Interview several, ask hundreds of questions, and for your first deal, do not under estimate. go for the most conservative expectation.
As for pricing, returns, and exit strategy - always remember that INCOME property is just that. Your proforma should be your own, don't go by what the seller is doing. His success or failures are seldom reflected in their operating statements. The concept of fix n flip is seldom the case in multifamily. Fixing the property may not result in higher rents but simply addressing differed maintenance. Additionally, you will need to go thru typically two lease cycles until the new rent levels become marketable as real income. If you think as year one as a rebuilding year and year two as your first stabilized year, then a sale or refi in year three would be realistic as a short term hold.
Lastly, apartments are not like a good wine, age is your enemy. As the property ages, repairs become more expensive and replacement of key structural elements even more so. Above normal cash flow should never come at the expense of keeping up the property and staying in touch with market needs. We always seek to emulate the best property in our market so I would suggest that when you do your comparisons, find the best property in the area, and see how your property can compete with it. If you only compare your property to other just like yours, you will never create value.
Good Luck
ps. In Texas, stay away from two-pipe systems.
