I am looking at a medical building with 2 units. Well actually the entire building is 4 units but this is just 1 side connected by a small common area. The building was built in 1963. The outside is in nice condition, the inside is good but dated. The upper tenant is chiropractor with a lease for 4 more years. The lower is a telemarketing firm under lease for 4 more years. The other side that is not for sale is a dentist and doctor. Its a lease where the tenants are responsible for everything except the outside of the building, including all utilities, taxes, insurance, interior and HVAC maintenance. There is 3% rent increases anually. The asking price is $225,000. I would have to borrow the entire amount. Rent is $1500 upper and $950 lower. My P&I payment would be about $1500 a month with little maintenance cost now. This would make a nice cash flow right away. Am I missing something. I have no commercial experience. Thanks.
What is the value? What could you sell it for if you had to sell quickly? How much down? What is your financing like, equity and cashflow? Condition? You will want to determine your ROI, LTV, risk, equity, cashflow, etc. If you have a good LTV, high cashflow, high ROI and favorable financing then it could be a good investment with low risk. I know of a 5 property package for just over 300K that brings in almost $5500 in rents which is almost 2% of purchase, just rehabbed, fully rented and has equity. Your rents are around 1% of the purchase, but the 4 year leases are great.
It probably will not appraise for much more than the asking price. I need 20% down which I would likely get from a home equity loan. I would be looking at a 3 year balloon amoritized over 30 years at 6.8%. Cashflow would be good at about $900 a month with both the primary loan and home equity on my home. The building is in good condition. The only problem I could uncover was a leak in a part of the roof last winter where ice dammed up. Looking at strictly cashflow it looks pretty good. The only issue I see is that I talked to the upper tenant and they dont like that fact that there are not seperate utilities. He thinks the lower tenant uses more electric but says there isnt much he can do about it. I would love to get seperate meters at some point but have not idea how much that would cost.