Ok,
It’s been a while since i’ve been on the forum so please be gentle (j/k). Anyway, straight to the point. After dealing with residential real estate for a while (4 duplex’s and 1 3-Family) I’ve decided to try my hand at commercial REI. I’ve jumped back on the boards getting tips from everyone and think i’ve found a nice property to take a look at. Tell me what you think (according to the agent):
Property: Two Story Brick 12 Unit: 8 2bd/ 4 Studios
SalePrice: $500k
20% DP: $100k
2bd: $650 p/u
Studio: $465 p/u
Gross rents per month: $7,060 (84,720 per yr)
Expenses:
Water: $236.58
Gas (2yr avg): $770.83
Electric: $624.83
Garbage: $50
Insurance: $166.67
RE Taxes: $463.25
Maintenance(5%): $353
Vacancy(5%): $353
TOTAL $3018.16
CapRate: 8.9%
Now, here’s where I’m having my FIRST problem. I’m not sure what to estimate as an “average” interest rate for a 12 unit prop or the perspective terms I may face like 15-30yr (hoping you all can help with ideas). I’ve used bank financing ONCE for my primary residence but never for commercial obviously.
ALSO, I’ve read that I can’t evaluate CREI as I would residential so the $100 p/u is a bit more flexible (ie: $75 p/u is acceptable). With this being said should I let $50-$75 p/u slide when I religiously went for $100 p/u in duplexes (granted they were pre-foreclosures)
If you can, please give me the bluntest answer possible as I don’t even want to see this prop if it doesn’t make sense. I’ve HEARD that 6.75 is a decent/average IR for CREI due to the Fed cutting rates but I’m not sure. Thanks ahead for your critique’s!!