Historic Main St deal, is it worth it?
The property is in a small, somewhat touristy town in Colorado. It sits on Main St and is a two story commercial building. Four storefronts renting per YEAR at $8,400 (until 2021), $13,200 (2026), $5,280 (2019), $3,600 (2027), and multiple currently vacant offices rentable at $25,200/year if fully rented. That makes a total potential yearly income of $55,680.
The yearly expenses reported are $500 for repairs/maintenance, $7200 in utilities, $960 in insurance, $2970 in property tax, and $500 in miscellaneous. That makes the total yearly expenses $30,590. (Do these expenses seem low?)
I've negotiated some and the last counter was a sale price of $515,000; with 20% down ($103,000), and seller carry financing at 5% interest rate amortized over 30 years with a balloon at 5 years.
The potential with the property: the rents are 40% below market, the office space could be turned into residential and command steadier rents at about 30% more - that would cost about $150,000. There is room to add a rooftop deck that could be rented out at approximately $10,000/year.
1. Are those expenses consistent with commercial buildings like this?
2. Do the price and terms make this a good deal considering the potential of the building?
3. What should I do?