Putting an offer in on my first commercial property. Help needed!

[Terry Smith]

I need help analyzing this deal and figure out if it’s a good long-term investment, buy and hold. It’s been on the market since May so it’s not a great deal or one of yall would have scooped it up by now haha. I have not gotten all the numbers from the seller yet but here are the basics. It’s a commercial building with offices on the bottom and 3 loft apartments on the second floor. All spaces are rented out with long term tenets.

Asking Price: $615,000

Rents: Over $6,000

My bank with do a 15 year loan at 4.85% with 20% down. I plan on putting 200K down but even then the cash flow is not what it needs to be for me. The end goal is to pay down hard on the building and pay it off in 7-10 years. I do not need the cash flow right now but could use it moving forward in other investments and paying this place of early. I asked the realtor if the owner would consider owner financing and they said yes but at a higher interest rate. I was thinking I should look around for other loan options to make sure im getting the best out there but for now I started with my local credit union I have been using my whole life. I could use some advice going forward with this deal, creative financing strategies or how to go about making an offer that works in my favor but isn’t a slap in the face to the owner. I would like to offer somewhere around the 500k range because the numbers look much better when I run them using the bigger pockets calculator. Maybe I could do a 7 years balloon option. The floor is open….. what other options should I consider?

[Andrew Johnson]

@Terry Smith Good feedback!  I think you and I are on the opposite side of the spectrum.  I like later builds where I don't have to worry about lead based paint, asbestos, etc.  Then again I invest in out-of-state properties so buying a fixer when you're thousands of miles away is a scenario fraught with challenges.  One thing we do agree on is that you should buy what you like.  Or, at the very least, buy what you want to own.  If you like it checking on it, touching base with a property manager, etc. doesn't have to feel like such a chore.  The risk is you overpay because you buy with your eyes and not your pro-forma.  Best bet, establish your cap-rate requirements and then find properties that you like that meet your threshold.  Keep it objective.