My First Commercial Real Estate Deal

[Andrew Jolly]

I've come across an opportunity that I almost cannot pass up, but I wanted to run the numbers by you guys just to make sure I'm not missing anything. The deal is 2 buildings, close to where I work and live. Both are 30x40 pole barn buildings. One is heated with concrete, and the other is a rock floor cold storage building. 

Purchase price: 45,000

Down payment: 9,000

Term of loan: 20 yrs (breaks down to a 252.75 payment)

Property Taxes: $900 / Yr, or $75 / month

Insurance: I'm not too sure on this one, so I will guess somewhere close to property taxes (1000)

Desired Rate of Return (cash on cash): 8% - $720 / yr, or $60 per month

60 + 252.75 + 75 + 84 + 28.25 (Maintenance)= $500 per month Gross income needed on 2,400 SqFt

So My question to you guys is:

Does $.20 per square ft / month, or $2.5 SqFt / Yr sound like a feasible price for storage?

My Plan is to use the heated portion as my personal shop until I move away in December.  I already have one person who wants to rent out heated storage for a motorcycle over the winter, and another individual who is already renting a space in the cold storage for a small boat ($75 per month).

I did not include utilities, mostly because I'm not sure what the cost would be. It is on natural gas, and does not have running water or sewer to worry about. 

Any responses would be greatly appreciated!

[Bob Langworthy]

@Andrew Jolly, congrats on finding an opportunity! Your analysis of the expenses looks pretty solid. The price for storage is going to vary depending on a lot of factors. Your best bet is going to be searching local sites (commercial realtors, craigslist, etc.) for currently available storage in your area. That will give you an idea of what the market can bear.

Hope this helps,