First time purchasing a commercial property - Looking for advice
Hi. I am the the process of acquiring a commercial property with a total of 12 units. 4 Retail, 8 residential and 8 storage units. There is an additional building lot included as well.
Purchase price: 745k
Monthly income: 7.5k (all retail/residential rent between 600-700 and storage 60) - all units currently rented.
Taxes: 5k/year
Insurance: 5k/year
Maintenance: 15k/year
As it sits right now, the numbers seem to work ok. This is an older building (1950's) and will require more maintenance than normal.
The property is in a small beach community and can be converted to VRBO. Its about 3 blocks to beach and next to main street.
Residential units: Most of the units will need to be updated and furnished to convert to short term rental. Looking at 5-10k a unit for budgeting. I believe based on similar properties, the conversion cost can be recovered in the 1st year. Roughly 15k/year income after costs.
Retail units: Worried about the economy and not sure how the retail shops will continue. I'm hoping to leave everything as is and just keep the existing tenants. 30k/year income total.
Storage units:I'm not too fond of the storage units. They are ugly and do not generate that much money. Also worried about any liability associated with them. I think most likely, I will just honor the existing contracts and remove from property. It is basically a large wooden shed. 10k to remove.
Open lot: Looking to build a beach house. Budgeting 400k including fully furnishing it via a construction loan. It will be used for vacation rental. I am expecting about 50k/year income after all costs.
Additional info for calculation of vacation rental: I have looked through VRBO/Airbnb and also talked with local vacation management companies and this seem to be realistic expectation.
June/July/Aug - full weekly rate at 90% occupancy
Rest of year - 80% of weekly rate at 40% occupancy.