Does this sound like a good deal? Its a commercial building in a great area with good appreciation. It seems to be in good shape and would not need repairs. The tenents are all on long term leases (10,5,5,3,vacant)
asking price 895,000
rents 110,590
expenses 65,895
noi - 44,730
seller is willing to finance.
I haven’t talked with them about terms but if they were fair would you recommend this deal? Considering the stability of the tenants and the area.
thanks,
-Dan
My first reaction is that at the numbers given - it isn’t such a hot deal. Of course, does your gross rents include rent for the vacant unit? If it doesn’t, then there could be some upside if you can get the other unit rented.
As I see it - a “standard” deal would look something like this=
Asking Price: $895,000
20% Down $179,000
Mortgage $716,000
Mortgage of $716,000 @ 20 years @ 8% = $5988.91/mo or $71,866.92 mortgage service
Which means with the $179,000 down you will have a negative cash flow of $27,136.92/year :shocked or $2,261.41/month :shocked :shocked :shocked
Not something I’d want to do :anon
Of course, you can work magic with the seller going longer years and lower interest rate but to have a zero cash flow you would need to finance something around:
$525,000 @ 7% for 25 years.
With those numbers, even if you offer $507,500 with $50,000 down, financing $457,000 @ 6% for 20 years for payments of $3,274.09 - but even then I would only have a modest $450/month positive cash flow - which means a 10.8% CAP RATE - which is not bad but not good in my book. I normally look for 15-18% Cap Rates.
if you’re putting 20% down you shouldn’t be at rates higher than 7% or with a term of less than 25 years on multifamily.
Regardless, your still negative by alot. doesn’t seem worth it.