Help me analyze this deal- 9 unit multifamily
My partner and I are heavily pursuing multi-family and apartment complexes under 10 units as our first joint venture. We recently found an interesting commercial deal with a lot of opportunity. It is a 9 unit complex - (6) 1 bed 1 bath units and (3) 3 bed/2 bath units. The rents are currently way below market rate and its current gross monthly income is $2,750. The comps show that we can raise rents high enough to bring in at least $4,500 in rental income. The only caveat is that the seller wants this to be a cash only deal with minimal owner financing. His asking price is $190K, but we to start with a low offer since he is asking for cash. The assessed value is $169K and he owns it free & clear.
We need help structuring an equity partnership that will be mutually beneficial for us and our partner. We're relatively inexperienced; my partner is in the middle of a live-in flip with her spouse now, and this will be my first investment. We know that our future equity partner will take our lack of commercial experience into consideration when structuring this deal. We'd really appreciate it if you experienced investors can take a look at a few of the terms we've been playing around with and give us feedback letting us know how we can sweeten the deal for both the equity partner and ourselves.
Asking price: 195k cash
Assessed value: 169k
First offer: 130k
Max offer: $165K
Repairs: $5-10K, which we can fund without help
Current Yearly Net Profit: $25K
Current Cap Rate: 13%
Based on the info provided by the owner, the current expenses are close to $800/month excluding property management. Ideally, we'd like to have an equity partner who can leverage their assets to fund the entire deal, and we handle 100% of everything else. The equity partner would get 50% of net monthly cash flow with a buy out after 3 years. To buy them out, we plan to obtain a mortgage and pay them their remaining contribution (excluding their previous monthly payments) with 15% interest on the remaining balance, compounded quarterly. Any feedback on how to improve or revise this partnership is greatly appreciated. We are looking to find an equity partner and put an offer on this as soon as possible, after the owner answers a few outstanding questions.