First commercial deal considering
This town has a population of 5,000 people. Its directly downtown. brand new 2 bed 1 bath on third floor/3 offices on 2nd story/3 offices on 1st story. Only 2 are occupied. Owners are looking to get rid of it and be done with it. They had great tenants in the past but the one tenant that was taking up a majority of the building went and bought a place close by. Since the place has been open. Considering developing a cowork space down stairs to get creative and draw some attention. Offices need central air, or do they? Is this necessary? Is it risky buying a commercial place like this if its not currently rented? I know how to market very well and believe with some creativity I can make this place a desired place. The brand new third story apartment will rent fast. Please keep in mind I am BRAND new to this. Im a realtor in NJ but im trying to learn commercial real estate. Here are the numbers I have ran. Thoughts? Thanks in advance.
| Office 1 downstairs | $1,000.00 |
| Office 2 downstairs | $1,000.00 |
| Office 3 Downstairs(occupied) | $900.00 |
| Office 4 Upstairs (occupied) | $900.00 |
| Office 5 Upstairs | $650.00 |
| Office 6 Upstairs | $650.00 |
| 3rd story apartment 2 bed 1 bath | $1200.00 |
| Potential Rental Income monthly | $6300.00 |
| Potential Rental income Yearly | $75,600.00 |
| General Vacancy-8% | -$6048.00 |
| Repairs-5% | -$3780.00 |
| Effective Rental Income | $65,772.00 |
| Property taxes | -$6059.72 |
| Sewer | -$2,000.00 |
| FMI Insurance | -$1131.00 |
| Total Expenses | $9,190.72 |
| Net operating income | $56,581.28 |
| Mortgage | -$12,948.12 |
| Cash Flow per year before tax | $46633.16 |
| Purchase Price | $268,000.00 |
| Down payment (25%) | $67,000.00 |
| Cash on Cash return. Yearly cash flow/down payment | 70% |
| Cap Rate- NOI/Purchase price | 21% |
| Loan amount | $201,000.00 |