I'm a rookie and have an opportunity to purchase a mixed use property that needs a lot of renovation. Can anyone help me figure out whether this is a good or bad deal?
Asking price: $90,000
Estimated renovation: $100k
Current occupancy (1 residential, 3 commercial) net yearly income: $9,132 (not including loan repayment)
Potential occupancy (4 residential, 3 commercial) net yearly income after renovations: $27,240
Real Estate Agent · Columbus, OH · Member since 2021 · 124 posts · 86 votes
1y
Hi Tamara,
If you were to pay for this deal with cash and we assume that your net income is after all expenses (utilities you are responsible for, taxes, insurance, lawn maintenance, etc.), you are making $27k/year on a $190k investment. A 14% cash on cash return is really good. If you were to finance the deal at a 75% LTV, you could increase your cash on cash returns to 25% to 30%, which is great.
Make sure you are accounting for all potential expenses in your numbers, including vacancy and any loan or hard money costs. If you are confident in your numbers, it looks like this could be a good deal.