Checking Deal with Commercial Tenant component!

[Earl Gaines]

Hey All!

To make it short and sweet, I have a major value add commercial property (4 residential units, and a 4000 sq.ft. commercial space, 2 stories tall, extremely large basement) that the owner is willing to seller-finance. The property is on Main Street in my 50,000+ person town with many great businesses neighboring the building with other properties being renovated all around. 

Currently, I don’t have the funds to tackle this deal alone after buying and fixing up my second 4-plex 2 months ago. However, I do have a hard money lender who will offer 11% interest to cover the down payment and some of the needed renovation costs. All I need to bring is the closing costs and the rest of the renovation budget, which I’m considering a private lender for.

I want to make sure I’m evaluating the property correctly, before I place an offer and find private money to complete the deal. I apologize in advance for the layout of the details below.

Any advice or comments would be very much appreciated!

Details

Price: 

• $285,000 ARV: $600,000 (based off projected income)

        $115,000 rehab budget ($30,000 Roof critical and already quoted, $45,000 updating and repairing residential units, $40,000 HVAC system for commercial unit)        

       All in budget of:

$457,750 = ($135,000+$15,000) + ($225,000+15,750) + ($40,000+$2000) + ($25,000)

            Hard Money+11%   +  Seller Finance+7%  +  Private Money+5% + Closing & Carrying

Income:

        4 - 1bed/1bath residential units ($2800-3400/month dependent on finishes)

        1 commercial unit ($2000-4000/month) brick walls, hardwood floors, 18’ Ceilings, 4000 sq. Ft. Tenant to buildout space for residency

        Projected gross annual income: $57,600-88,800/year

        Projected annual expenses: $22,100/year 

        Annual Expenses breakdown: $2,000 vacancy, $2,500 maintenance, $3,600 management, $3,000 utilities, $4,000 Taxes, $3,000 Insurance, $4,000 Reserves 

Refinance:

$450,000 (75% of $600,000 ARV) 5% interest 25 year am, annual debt service of ~$32,000

        After Tax Annual Net Cash Flow: $3,500-34,700

       Cash Left in Deal: $7,750

COC Return: 45%-447%