Thoughts on this deal?
I’m making the switch from multi families to commercial. I’d appreciate thoughts on this deal:
Medical building priced at $1.9M. Tenant just signed a 7 year lease at $14,667/month with two 5 year options and 2.5% increase per year. The seller is putting $425k towards remodeling and tenant is putting $200k. Mostly paint and flooring, plus some IT and office stuff that will benefit the tenant. The lease states that my taxes will be capped at $8900/year and insurance at $1900/year. I pay anything HVAC over $2000/year. 3 of the 8 HVAC units were recently replaced. They are $6000 each and the others range from one really old one to some middle aged. The roof is steel but some areas need repair. To replace the whole thing (not necessary right now) would cost $60,000. The parking lot would cost $40,000 total but only needs about $10,000 worth of work in the back right now.
Financing would be 15% down and 4.0% for 5 years, 20 year amortization. Other expenses would be about $1000/year landscaping.
Thoughts?