Advice on Small Strip Center Purchase

[Tim Rainey]

Hi,

I am new to the forum and new to real estate other than my office building for my business. I thought it would be wise to have opinions of those more experienced than I am. So, I pasted the basic cash flow from a small strip center that I am looking to purchase below. The property location is on a main street 2 blocks from the only grocery store in a small but fast growing town. The only negatives so far that I see is that parking is not abundant,  but adequate and there is one vacancy which has interest but the current owner has been holding out for something other than a nail salon or supercuts which are both interested. At any rate, it appears that it could be filled quickly. Also, I understand that the rent has not been increased for some time and is past due for that, so there is an upside.

The issue that I am having is that its not much cash flow at the price, which is 2,250,000 with 20% down. At that rate , the monthly debt is 25 year amortization on a 10/1 ARM starting at 5.50% fixed; then adjust every year to 1 year LIBOR ICE SWAP Rate + 3.25% every 5 years with a floor of 5.50%. Estimated payment on this option would be $11,053.57 per month.

So, once the vacancy is filled there should be $2311 in monthly positive cash flow according to fully rented projected NOI. With 1 vacancy there is only $211 cash flow as it stands now which doesnt inspire confidence to me, or am I wrong. The Third set of figures below is projection with vacancy filled.

So, is the return here typical for small strip centers in good locations? Any thoughts on the deal? My CPA is trying to talk me into just sticking cash in the stock market, but I have lost a lot of trust in that. I would really like some NNN real estate and this one looks the best of those that I have found.

Thanks in advance for any advice.

Tim