First Timer Here! - PLEEEEASE Help me analyze this deal

[Joseph Timon]

Hello everyone! First timer here and this project is a doozy! It's a 5 unit (2 commercial, 3 residential). The purchase price is low ($170000) and has great cash flow, BUT it needs extensive work - $50k-$90k of necessary upgrades - HVAC (no heat!), $5000 emergency stairs off roof, electrical panels are currently 100A and need to be upgraded to 200A (among wiring upgrades), and a few bathroom upgrades (leaky/rusted fixtures for $3k-$5k/unit). Is this deal worth it??

We're putting 20% down. Using cash for remodels. Loan at ~7% for the difference.

PLEASE HELP!!! 

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*This link comes directly from our calculators, based on information input by the member who posted.

[Jaycee Greene]

Quote from @Joseph Timon:

Quote from @Jaycee Greene:

Quote from @Joseph Timon:

Hello everyone! First timer here and this project is a doozy! It's a 5 unit (2 commercial, 3 residential). The purchase price is low ($170000) and has great cash flow, BUT it needs extensive work - $50k-$90k of necessary upgrades - HVAC (no heat!), $5000 emergency stairs off roof, electrical panels are currently 100A and need to be upgraded to 200A (among wiring upgrades), and a few bathroom upgrades (leaky/rusted fixtures for $3k-$5k/unit). Is this deal worth it??

We're putting 20% down. Using cash for remodels. Loan at ~7% for the difference.

PLEASE HELP!!! 

View report

*This link comes directly from our calculators, based on information input by the member who posted.

Hey @Joseph Timon, welcome to the BP Forum! Have you actually discussed this project with a lender? If you're going to spend up to $90k on rehab, why do you have to spend over $1,100/month in maintenance?

 That is a good question. I have been just assuming "maintenance" would be 35% of the income/month - that's where that $1100 comes from. What is typical "maintenance" on a distressed property? 

3 out of 3 residential units are leased in this property until Dec. 

1 out of 2 Commercial units are rented (it's a long term tenant). So there is room to add value in that other commercial property. We could get $800-$1100 in rent, especially after cosmetic repairs like flooring is updated and we fix a toilet.

What are your thoughts with that?

 @Joseph Timon When I run proformas for my CFO clients, I use 35% for ALL operating expenses. I would recommend upping the rehab budget to minimize the amount of ongoing maintenance. Have a close to 50/50 mixed use property is going to make it more difficult to finance - most lenders specialize in one type of lending or the other. For a mixed-use property, you'll probably need to talk with a local lender.