Commercial property deal analysis - HELP!

4 Replies

Recently I️ had this deal thrown my way on a commercial property and I️ wanted to get others opinions on it. The property is an 8 unit commercial building with 1 residential unit. It is also a seller financing deal. The selling price is $250,000 with 15,000 down amortized at 6% over 15 years. It brings in $4700/month with expenses of around $2,000. Payments would be $2,000, leaving a cash flow of around $700. I️ know it doesn’t cash flow the greatest, but I️ feel that it would be a good buy to build equity rather quickly being that it is a $250,000 property and is seller financed. Or what if I️ could get it for $10,000 down at $235,000? What’s everyone think? Need some good advice!

Some of the best advice I think you can hear is : first decide on your risk tolerance, decide what is an acceptable return for you or your investors, then develops a simple model/ spreadsheet that indicates your assumptions, then plug in “as close to” what facts you can independently verify, then the anticipated unknown. If the resulting return meets your “good deal minimum “... then it’s a good deal.
I see/hear too many investors try to adopt the definition of a good deal when strategy,liquidity, and market ; collectively answer “that” question.

Gross rents look great for the price. Are all the rent and expense numbers verified? Would you have to spend cash up front to improve any of the units? How long are the current commercialand residential leases in place for, if there are any in place at all?

Knowing the answers to these questions will help everyone weigh in with more suggestions. 

Gross rents look great for the price. Are all the rent and expense numbers verified? Would you have to spend cash up front to improve any of the units? How long are the current commercialand residential leases in place for, if there are any in place at all?
Knowing the answers to these questions will help everyone weigh in with more suggestions. 

Gregory,

All the numbers are verified. The seller only did year leases. No money would have to be spent right away.

It sounds good, and hopefully those rents appreciate a bit to generate at least $100/door, or your financing expense comes down when you refinance to acheive the same thing. What did you end up deciding @Dustin Pavlik ?

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