Need some input and Advice

[David Clay]

I live in a small market where the entire county is about 60k people. The largest town is less than 10k altogether. I am looking at two commercial, mixed use properties. I really need help on figuring both of them out, but I'll start with the one that I'm trying to lay out a plan for at the moment. It is a 6k SQFT warehouse. It needs a ton of work - a ton. I'd like to potentially use it as mixed use: 2000 soft up top for 2 rental units and the 4k below has potential, but I am undecided at this point. I have considered converting to rentals as I could possibly get 3-4 in that space. Maybe. I think the rehab is likely 100k+, I'm guessing here. I've looked at it, but I don't have experience in the commercial rehab space so... In any event, I'm going with 100k+ as a good first estimate until I can get someone in there to look the building over for me. I'm trying to figure out what kind of numbers work. The owner is asking for too much, something around 160k. I think 120k is fine for this market even in this beat up condition (some small back story - the town is working to change the central area and make it a destination for the local region so values should be on the rise soon). 

Here are the options that I have considered with the idea that I would need to get two tenants in the building and then attempt to make the purchase and cash out the owner: 

Option 1

Sale Price: 130k

Monthly $: 1k (the owner's pmt is estimated at 2k, but this is uncertain as I haven't spoken with the owner directly). 

Option Period: 18-24 months w/right to renew at least once.

Carry over toward final payment: 10%

Deposit: 2.5k

Option 2

Sale Price: 120k

Monthly $: 1.5k

Option Period: Up to 36 months w/right to renew at least once.

Carry over toward final payment: 10%

Deposit: 2.5k

Option 3

Sale Price: Balance Due + 5k with owner financing

Monthly $: 2k +/- with payments to start in 3 months after agreement

Option Period: 36 months w/right to renew at least once.

Carry over toward final payment: 10%

Deposit: 5K

Option 4

Sale Price: 130k

Monthly $: Monthly payment 2k +/-

Option Period: 36 months w/right to renew at least once.

Carry over toward final payment: 10%

Deposit: 5k

Here's my thinking: I'm pretty certain I can rehab the space (well, almost certain) and get some tenants in within six months probably sooner depending on the amount of work. I think I could get the building financed (it already has a mortgage on it) with a couple of tenants in it up top. I could then use some of the cash and rehab the bottom area for either additional apartments or an artist space where people can rent little rooms by the month $200, $250 etc. 

Alternatively, I could buy a mixed use space at 425k +/-. It already has tenants in it. It has space for a restaurant and one additional commercial tenant (has 3 residential and about 7 commercial).  I can go into details on that later I suppose, but I first wondered if anyone had any input like don't do it. Not worth it, etc. Or some things that I need to consider. This is my first commercial purchase. I already know the owners for the 2nd are flexible and willing to hold a note. The first owners are open, but are waiting for a letter of intent so they can consider the offer. 

Well, that's all for now. I've probably flubbed up somewhere in my rationale, but that's why I'm posting. :) Cheers.