Would Love Feedback Analyzing a Mixed use Commercia Deal

[Jennifer Baldassari]

Hello Bigger Pockets,

Would you please provide feedback analyzing our first "big" deal? We have 1 duplex and 3 SFH's however this is our first commercial and it's mixed use.

This is a downtown "main st"-type property in a vibrant small midwestern town consisting of two 2-story buildings built in the late 1800's.  

On the street level are 3 commercial tenants (restaurant, attorney, and pharmacy) - nice, newer, redone.  On the second level(s) are 10 apartments -  all constructed in 2007.  Essentially, all tenant locations are updated and newer, it is the buildings themselves that are old but have been maintained.  Due to the age of the building and the mixed tenancy; insurance came in at $10,307.00.  The primary risk we heard from several brokers is the restaurant under living quarters.  According to the broker, when or if the space no longer has a restaurant below apartments (which would be in our control), the risk lessens a bit and premiums could very well come down.  All tenant rents are below market by at least a couple hundred each.  So, there are concerns however also obvious upsides.  We are kind of stuck knowing which way to go.  Probably our main concern are the old buildings and cost of insurance plus any issues with an increase over time of insurance and property tax.  On the flip, having 13 tenants (and a variety of them) and occupancy rate at 80% with below market rent is a good place to be to lessen risk.

Here are our BP calculator results:

Purchase Price:  $360,000.00

Down Payment:  $45,000.00 (actually secured by another investment of ours)

Mortgage:  $2,590 at 6% over 20 years

Rents: $7525

5 year annualized return:  38.79%

CoC: 47%

NOI: $52,197.00

Pro Forma Cap:  14.50%

7% reserves for CapEx, 7% reserves for maintenance/repairs, 3% vacancy

Cash flow:  $2,157.00/mo

Cash flow at the 50% rule:  $1,570.00

I'm very excited to post this deal to the forums because I've read such awesome feedback on other posts.  We just received our insurance quote about an hour ago so I wanted to get on here and get some feedback from my people!  :)  Let me know if there is data missing to help come to a good assessment.  

Thank you!!!

Jennifer