Beginner: Analyzing and Financing Small Mixed Use

[Collin Ordonez]

Hi everyone! First post here on BiggerPockets. Currently I am house hacking a townhouse and I am looking into buying a multi family property for my next deal. I recently found a listing of a mixed use commercial building in the downtown historic district with 5 apartments (3 - 1bed/1bath and 2- 2bed/1bath) with lower level storefronts that are fully occupied. I would like to get some advice on financing and analyzing small commercial deals. Here is the current information I have on the property :

List price: $1,450,000

NOI : $91,091

Cap Rate: 6.28%

I have the following questions to begin with:

1. Financing: What are the first steps I need to take to be able to get approved for a commercial loan for this property type? It’s my understanding the best route may be to reach out to small local banks. For a downpayment I believe I could make a 25% downpayment between personal savings and investments from a couple family/friends. Would it be possible to get a bank to give me a loan or would I need to partner with someone with commercial real estate experience?

2. Analysis: What are the factors or calculations do I need to consider when underwriting a deal to decide if the property is a fair value and worth pursuing. Should the main focus be on cash flow and ROI? With current market conditions what is a good target for cash flow and ROI.

I know these may be very basic questions for the big picture but I hope it’s a good start to begin a conversation.