HockeyGuy
PARKED
Hello.
I'm taking a look at my first commercial deal. The property is a 16 unit property.
After a few repeated inquiries, I've finally got the real estate agent to "put the numbers together" and send me the details. I'm a little frustrated by this guys lack of responsiveness, but I digress....
Anyway, its a 16 unit property built in the early 1960s in a first ring suburb of a not-too-well off city.
Its listing for $585,000.
Cap 7.28 (I already think thats way too low)
Annual rent - $110,000
Misc income - $1400
Gross Sched income - $111,100
Vacancy/Credit Losses - $5,555
Gross op income - $105500
total exp - $63000
Net opp inc - $42600
est mortgage - $38000
Cash return on eq - $4600
Taxes are $28600
Insu - $6100
Gas - $12000
Electric - $3000
Water - $2500
Maintenance - $5300
Trash/disposal - $1800
Snow removal - $1300
reserve - $2200
total expenses = 63000
net opp = 42600
My first reaction is that a cash return on equity of $4600 is WAY too low for this type of investment - especially since owner pays heat and water. I've already heard of a potential 33% raise in nat gas costs this upcoming winter.
I'm interested in hearing some veterans thoughts on this. SteveO, what do you think?
I know I have to go back and ask for a substantially lower cost at this point as I don't feel comfortable with that little positive cash flow and small cushion.
Heck, my 4 unit property almost gives off that much positive cash flow
I'm taking a look at my first commercial deal. The property is a 16 unit property.
After a few repeated inquiries, I've finally got the real estate agent to "put the numbers together" and send me the details. I'm a little frustrated by this guys lack of responsiveness, but I digress....
Anyway, its a 16 unit property built in the early 1960s in a first ring suburb of a not-too-well off city.
Its listing for $585,000.
Cap 7.28 (I already think thats way too low)
Annual rent - $110,000
Misc income - $1400
Gross Sched income - $111,100
Vacancy/Credit Losses - $5,555
Gross op income - $105500
total exp - $63000
Net opp inc - $42600
est mortgage - $38000
Cash return on eq - $4600
Taxes are $28600
Insu - $6100
Gas - $12000
Electric - $3000
Water - $2500
Maintenance - $5300
Trash/disposal - $1800
Snow removal - $1300
reserve - $2200
total expenses = 63000
net opp = 42600
My first reaction is that a cash return on equity of $4600 is WAY too low for this type of investment - especially since owner pays heat and water. I've already heard of a potential 33% raise in nat gas costs this upcoming winter.
I'm interested in hearing some veterans thoughts on this. SteveO, what do you think?
I know I have to go back and ask for a substantially lower cost at this point as I don't feel comfortable with that little positive cash flow and small cushion.
Heck, my 4 unit property almost gives off that much positive cash flow
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