Posted by InNJ on April 14, 2006 at 09:48:21:
Hi,
I am looking at the retail strip with following details:
Asking price: 800,000
NOI: 57,000
CapRate: 7.1
Size: 6500 sq ft.
No. of stores: 6
Paking: none, street parking and there is muncipal parking lot across the street.
It is completely leased with about 3% increase per year. Two of the leases are expiring in 2008 rest are longer term. Area is good and looks like it is growing. I spoke to one mortgage broker about it and he offered me the following. Nothing is on paper yet just verbal.
Terms
10 year fixed
25 year amortization
6.5-6.7%
25% down
Cost
$1500 non-refundable application fees when he gets me the LOI from bank.
Bank charges (no points, appraisal, environmental, inspection, engineering, attorney). approximately $6000
1% to broker at closing. approximately $6000
I am estimating the total cost to be $15000 to be safe.
At asking price following are my calculations:
Total price: Asking + closing = 800,000 + 15,000 = 815000
Down payment: 25% of asking + closing = 200,000 + 15,000 = 215,000
Loan: 75% of asking = 600,000
yearly Debt service (600,000, 6.7%, 25 year amortization) = 4126*12 = 49,512
NOI: 57,000
Cash flow: 7488
cash on cash return: 7488/215000 = 3.48% (Not very pretty)
Questions
- What would be reasonable offer for this.
- Loan terms sound right or it is off. I am little concerned about $1500 non-refunable. What are the possible ways to structure this. Ask owner for some financing etc.
- Any other comments as I am new to commercial and do not own any retail.