Can I Get Your Opinion On This Deal?
Hi Everyone, your opinion on this would be greatly appreciated.
Commercial/ Residential building
Location is right down town in a medium sized city
2 Residential (1 bedroom, 2 bedroom)
1 4 door auto garage (4500 sq ft)
1 printing shop (5000 sq ft)
Income:
residential - $15,600 ($1300/mth)
Auto garage $18,600 ($1550/mth) + taxes ($7243 $603.58/mth) + Insurance $2647.50 $220.62)
Printing shop $30,000 ($2500/mth) + taxes $12,531.12 $1044.26/mth) + insurance ($4112.40 $342.70/mth)
Expenses
property taxes $18,450
Insurance $6,760
tenants pay their own utilities
Asking price $650,000
income total: $90,734.02
Expenses $25,210
net income: $65524.02
What do you guys think? Thanks!!!
[ Edited by darrylgood on Date 11/12/2009 ]
10 cap is good if the numbers are correct. The absence of a vacancy factor would worry me-- I gotta guess its hard to rent apartments over an auto shop.
Also the lack of maintenance expenses.
It looks like the total of the property tax pass throughs is more than the actual taxes. Is that right? None of the taxes are allocated to the residential units?
Oh, and that bottom line should be Net income not Gross.
Thanks for the feedback guys.
The property is in mediocre shape. There are 3 separate roofs as i assume the property has been put together at different times.
2 tar and gravel roofs and one aluminum roof. One of the roofs had just had 7,000 worth of repairs done. the brick work on one of the buildings is starting to go down hill. It really isnt an impressive looking property , but it cashflows well <IMG SRC="images/forum/smilies/icon_smile.gif">
The residential is actually no problem to fill because of the location.
[ Edited by darrylgood on Date 11/12/2009 ]
Yes you are right, the commercial tenants are covering the whole buildings property tax. Not sure how that happened, but I am not complaining.
What do you guys think of the rent the 2 commercial units are paying for compared to the size of the units?
Quote:
On 2009-11-12 11:55, darrylgood wrote:
What do you guys think of the rent the 2 commercial units are paying for compared to the size of the units?
I would ask a reputable commercial agent that works that area.
I like the diversification/mix use of the property. The fact that you said the residential is easy to rent out should make you feel good about the location. The question I would ask is how easy would it be to rent out the commercial space if the tenants go dark? Depending on the surrounding tenant mix you may even be able to divide the printing shop into two commercial tenants someday. I would have to imagine the printing shop is having the toughest time economically.
Look at the leases and see if there are rent increases to cover inflation. Also what it is the length of each lease?
10% cap rate sounds okay but it depends on the condition of the property which sounds like you are responsible for. If you have some major upcoming repairs then I would negotiate that in the price to make your cap rate higher.
If you think this is a unique property compared to what is out there in the local marketplace, then you might want to snag it up.
Thanks for the response guys.
Well the reason it is easy to rent the residential is because it is a student area and the students like to live downtown.
The printing shop has been there for 16 years and hasnt been on a lease for a couple of years now. I will put in my offer that the printing shop be signed to at least a 5 year lease.
The auto shop has one year left on their 5 year lease.
The 10% cap rate is good, but yes the building is a bit rough and the retail spot that the printer is in, isn;t the most attractive from the outside.
I guess it really depends on how much they come down on price.
I know its quote low but I was thinking of coming in at 540k
An update.
He purchased it 2.5 years ago for $425k - asking was 520K
Seems like quite a jump to me