Hi,
I am trying to get the office condo in central jersey for investment purpose. I am planning on renting it out with triple net lease. I need triple net lease as I do not have time for the maintenance. After talking to the broker looks like I can get the following. This is the first time I am doing it so just wanted to get some feedback to see if it is worth looking into and what other questions should I ask. Number used below are the middle of the range broker quoted.
Office Conde: 1200 sq ft. for $140/sq ft. = 168,000
Rental income (triple net lease): $15/sq ft = 18000
Down payment: 20% (33600)
Loan expected 8% for 20 years: 1125 (monthly)
Cash flow per month: rent - loan payment = 1500 - 1125 = 375
Yearly return on downpayment of 20%(33600) is about 7.5%
There are also closing costs to consider with commercial real estate and it tends to be a little higher than normal residential real estate. I would factor in at least 5000 or more for closing costs. Nonetheless, the numbers you provided look good. I ran a quick proforma analysis from RentIncome.Com on the information you provided and it shows a 9.64% cap rate which is pretty good. The DCR is 1.13 which is a little slim and the cash flow is over $150 a month leaving you with a 5.53% cash on cash return. Overall, the numbers are good. If you could get more than 15/sq.ft. or work in a graduated increase in rent (i.e. 5 year lease with $.50 increases every year) it’d be even better.
The main thing to consider with retail or office leases is the tenant. Ultimately if you can get a good tenant with a solid business this property will be an above average deal.
focusagent,
Thanks for the reply and pointer to wonderful resource www.rentIncome.Com.