New to Commercial Property

[Elizabeth Regan]

We are looking to invest in our first commercial property.  We have only done residential up till now--very new to all of it.  I have some questions.  We are part time invesetors... My husband is the do it yourself guy--he can literally do just about anything, with nearly 20 years in construction.  I am a midwife and the business person/numbers crucher.  We are in need of an office for my midwifery business where I can see my clients.    I need a small space that I can rent to myself... i.e. defer income to schedule e and save on my mileage expenses (was %15k last year).  We wanted to find something that has multiple streams of income.  

There is a commercial building downtown Frankfort, KY (20 min from us--also where our residential rental property is located) that would work well for what we have in mind.  It is 4000 sq ft in a prime downtown location.  It currently has a very nice upstairs loft apartment being used as an AirBnb (avg $1,200 per month/$14,400 per year with the potential to make more) and a commercial unit downstairs that is rented for $700 per month (6 month lease).  This unit could definitely charge a higher rent--it even has the potential to be divided into two units.  In other words, there is a lot of potential here.  There are two additional units in the building.  One is an unfinished 2 bed 2 bath apartment (est $25,000 to complete) and then there is the unit that I would lease to myself.  I could reasonably charge $700 for this unit.    The purchase price is $190,000 and estimated repair costs are around $30,000 (need to add a toilet and sink in my unit).  Our financing would be a 7 year balloon fixed at 5% (or maybe a little less) and amortized over 20 yrs. 

This is how I evaluated the property based on potential income.

Proposed Income and Expenses	(35K for completion-including sky lights)
Source	Yearly Income	Yearly Expenses
Unit 1: L Grey Photography	$ 8,400
Unit 2: Upstairs apartment	$ 14,400
Unit 3: AWW	$ 8,400
Unit 4: 2 Bedroom Downstairs Apt	$ 12,000
Utilities		$ 8,400
Parking		$ 360
Insurance		$ 762
Taxes		$ 3,144
Vacancy	$ 4,320
Capital Expenses	$ 2,160
Repairs and Maintenance	$ 4,320
TOTAL	$ 43,200	$ 23,466
PROPOSED NET OPPERTATING INCOME	$ 19,734
PROPOSED CASH FLOW	$ 4,590
CASH -ON-CASH RETURN	14%
CAP RATE	8.8%

My first question is did I do this right?  Should I have not included potential income?  Should I base it on what the income is currently?  Should I not include my own rent? 

My second question is does this look like a good or bad investment?

I will reiterate: our original goal was to find a building that could offer me an office space to see my clients (I'm a midwife currently drive about 35k miles per year doing all home visits) and then also offer other streams of income to help offset the cost of my rent, while still getting to defer some of our income to schedule e as opposed to my super expensive schedule c income.  This is the closest we have ever come to making this work but I am acutely aware of my lack of experience and that I don't know what I don't know.  So, I want to make sure that we don't do anything royally stupid.