Commercial Property or 4 plex?

[Mark Sullivan]

Do you mind giving me your thoughts?  Last year I bought a Single Family Unit for $96,000 and after spending approximately $14,000 in rehab cost.  I then rented the property for one year and sold it for $162,500.  I am now wanting to do a 1031 exchange and have two options...which would you suggest? 

Option #1 Commercial Real Estate

I currently own a Subway and have the opportunity to buy the existing commercial real estate. The purchase price would be $415,000 and I think I can get an SBA 504 loan which gives a very low fixed rate (perhaps around 4%) for up to 25 years with 10% down.  Here are the numbers....

1. Current annual rent (including cams) - $40,800 (10% bump every 5 years)

2. Taxes - $6,000 (annual)

3. Building is in reasonable condition and is 10 years old.

Option #2 4 plex

4 plex (3 bed/2 bath with approximately 2,00 square feet per unit that has been completely renovated in the last year.  Purchase price would be $350,000. with the following numbers......

1. Rent per unit - $46,800

2. Mortgage (annual) - $297,500 @ 5%/ 25 years - $20,870

2. Insurance (annual) - $3,900

3. Taxes - $3,650

4.  Maint (5%) - $2,340 (recently renovated - is this a reasonable number?).

5. Vacancy (8%) - $3,744 (It is in a desirable location and in good shape so this might be high?)

6. Cap X (5%) - $2,340 (reasonable number?)

Which would you do?