What to watch out for in commercial/office space ownership?

[Jason Turgeon]

Hi everyone, first real post here. I'll get around to a proper intro in the appropriate forum and adding some profile info sooner or later.

I have a 2-family rental in Boston that has appreciated considerably since we bought it but rents haven't kept up. I'm currently sitting on about $250-300k in equity but only netting about $11k a year on the rents. I want more cash monthly to get me towards my goal of quitting my day job, and I lived in this property until 2 years ago so I can benefit by pulling out some equity without paying capital gains if I sell now. So I will have about $125k for the 1031 exchange and another $125k in free cash that I can either use to pay down private debt (student loans, HELOC on my personal residence, etc.) to decrease expenses or put into another income property.

Found a 10-unit office building about an hour south from me on the MLS. They're asking $500k. Here's the pertinent listing info:

We have an extremely motivated seller for this fantastic Ocean-view Office Building. Located right on a very busy location with amazing views ... The building has 3 levels and 10 units overall... with 7 of the units currently leased at $7,000/mo total. All units have individually metered electric, individually metered gas furnace, roof-top A/C units, and private half- bathrooms in each. City water and sewer, newer roof (5 yrs approx), and 34 parking spaces. This building would be a great location for a growing business or as a cash-cow investment. The owner has retired from business and no longer needs this amount of office space.... he's willing to consider all reasonable offers.

I figure I can put 25% down ($125k) on a 25-year mortgage at roughly 5%. Property taxes are about $8k. That puts my P&I at at about $2200/month, taxes at about $670/month. Taking a guess at insurance, maybe 1% of the value or about $400/month?  If he's generating $7k now and will have 3 extra units available for rent, these seem like very compelling numbers. He's cash flowing like crazy and it's 30% vacant now. There aren't that many things to spend money on...no lobby, no elevator, no staff, minimal plumbing, minimal common utilities, new roof, pics don't show any obvious repairs needed.

The numbers are almost *too* compelling...am I missing something obvious? Are there some extra costs to commercial real estate that I am not taking into account? What are the ways I could fail miserably here that I'm not seeing?

I contacted the listing agent a couple of days ago asking for full financials and he replied but didn't send them yet. Since I haven't even put my place on the market (I could sell it off-market pretty quickly to some investors I know), I am not quite ready to push him for more info.

Any help you all can give me to decide whether or not to pursue this would be appreciated.

Thanks!