Prospective Deal, Please Comment
Hi Everyone,
I have a potential deal on my hands. I am trying to be detail oriented in my due diligence so that I can make a informed decision. I currently own a 3 and 4 family house but would like to make a transition to commercial real estate. Please take a look and provide, comments, suggestions, insults and recommendations. Any discussion and comments here will help me form my final decision. Also please let me know if I left out any important information.
The deal is as follows:
$410,000 purchase price with 5% down seller financing, (interest rate as yet undetermined)
Most current, supplied rent roll from the seller has a stated income of ~ $9,200 per month @ 80% vacancy. The boiler was converted to natural gas last year and the A/C is 5 years old.
It is a 5 story office building with about 25k sqft located in a depressed downtown district. The surrounding streets are nowhere near war zone but could be better. The going office space rate per my research appears to be in the $10/sqft/yr range. Several of the tenants are lawyers, marketing firms and real estate agents. Many of the units are small suites with some larger 3 room suites. The building has obviously been cared for as it has a full time janitor who cleans the bathrooms, halls and other common areas. The building is nearly 100 years old and has many unique features like granite entryway, brass railings, mahogany window sills and fireplaces in offices.
The elevator does NOT work. Seller supplied a quote to bring it into operation for $80K. The place has operated without an elevator for about 2 years. Other issues with the elevator is that it is a small, (old style) elevator that would not meet code today. I still need to talk to the city and understand if it would be grandfathered in.
Many tenants only pay $200 per month, especially on the upper floors. The bottom floor is a retail store. There is a cell phone tower on the roof who contributes $1000. The seller is a lawyer who has a office in the building and wishes to stay. He reason for selling is that he is older, (70s and is tired of managing the place)