Informed of this potential deal by a broker for the selling side. I’m very (extremely) inexperienced at buying commercial real estate, and most of the information is provided by the broker. The contract price for the commercial real estate is $5.3M, and the downpayment, according to the broker, should be around 1.5M, and the remaining will be financed by taking a 7% annual rate mortgage. The expenses for the transaction will be around 0.1M, so total I have to pay 1.6M at transaction in cash. About the property, as of now the tenants pay 600K / year (all commercial buildings/no housing). The total expenses (management fees/property taxes etc.) will come to about 150K / year (all according to the broker). So before tax, 600K - 150K - 270K(payment for mortgage) = 180K / year pretax. Is this a sound investment? What are some ways that I can improve this investment (ie. better financing / better tax)? Also, since this is a commercial property, how hard is it to find tenant (ie. if one of the commercial tenant (restaurant) quits, how to find another one to occupy the restaurant)? What other things should I do? Thanks.
Are you still looking for advice on this scenario. I will be more than happy to review it and give you my 2 cents.
You could even get away with doing a 80% loan on this which would only require about a 1mil downpayment if the NOI is really 450k/yr.