Posted by StevenS(CPA) on August 01, 2007 at 09:14:39:
You said one tenant has been there for two months? If this tenant is shaky and doesn’t pay one month then you have a neg cash flow.
What is the area like? If it moving up or further down? Are new business moving into the area or somewhere near the area? What about re-zoning the property? Are you buying this no money down?
I think there are a lot of options with this but also a lot of questions.
your thoughts on slummy commercail building - Posted by brandoncbsre
Posted by brandoncbsre on July 28, 2007 at 15:34:24:
My goal is to own some nice strip centers in the future and I know that in order to get there I have start somewhere. I bought and renovated a building downtown and am leasing it to a real estate brokerage that I am 20% owner of. That building I am proud to say that own. I now find myself looking at a slummy downtown building 20 minutes from my home that seems to cashflow like a dream. The building has 2 apartments upstairs, 1 apartment and a storefront on the street level. Rents are $450 and $500 for the upstairs units and $550 and $150 for the street level (storefront is leased by downstairs apt. tenant for $150) Total rent is $1650 a month. I am waiting on actual copies of utilities and other expenses but the owner pays all utilities, taxes and insurance. I have been told that these average $600 month. Listed at $45,900, the agent said that there has been some interest but buyers couldn’t get financing due to their bank’s minimum loan amount. I have talked to my bank and they have no problem giving 75%LTV. I am thinking of offering $40,000 with $30,000 from the bank for 15 years and $10,000 seller second for 30 months at 8.25% (my bank says they don’t have a problem with that.) This gives me roughly $300 cashflow for the first 30 months then $650 plus a month after that. My concern is the units are pretty rough but the tenants have been there awhile (3yrs,4yrs,2months). My thinking is just rent it and do as little as possible for 6-7 years then boot the tenants one by one so I can renovate and lease the apartments then sell it. Would the slum-happy tenants slow you down on this deal? I don’t really have the cash on hand to renovate it now for better tenants.