Another commercial deal seems right on target
15k SF flex space, 24 years old. Nice looking building, warehouse/office. Near major metro downtown.
List price: $965k
New 3 year lease @ 8.5% cap rate($81k/yr) with established company
Tenant is responsible for pretty much everything. Rental rates are on par with market.
Seems pretty straightforward. 20% down @ 6% rate 30 years is 18% total ROI between cash flow and equity paydown. At 20 years, cash flow drops but ROI is the same.
Unless there's something missing in the lease agreement I'm missing, seems like a straightforward reasonable deal. Anything I should watch out for?
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$.45 a square foot rents seems low even for NNN. Cash flow ends in three years! Yuck. If you are going to be in the market for commercial properties learn what a cap rate is and how to use it.
Do you have any idea what the market is paying for similar NOI I would think something like this, low rent, short term lease. would trade for more like 12-15%. If that is market then you'd be overpaying $300,000 to $500,000+ ! How much rent are you collecting, 3 X $81,000= $243,000!