Newb Questions about Developing and Managing a Property

[Account Closed]

Hi BiggerPockets, sorry for all of the questions and long winded post, this is just some stuff that's been on my mind and I haven't received any advice from people in the biz, so I am looking for your guidance.

A partner and I own a property in a fast growing city (400% population increase since 2000), 40k ppl, on the town square. We operate a small business out of an older building and have a mortgage on the property. The business is growing and I could see us outgrowing our space in 2-3 years.

On one side of us, there is a two story mixed use development that is about 6,000sqft (3000sqft apartments, 3000sqft offices), built in the past 10 years or so. On the other side, there is a newly built two story mixed use development that is 10,000sqft (5000sqft apartments, 5000sqft offices).

The apartments all filled up quickly. Commercial space took a little longer but both buildings are at 100% occupancy. I've began putting some feelers out there about cost to build on our property and the general consensus is that it'd be about 100-150/sqft in our area. We would put down 25% and finance the rest with our bank if we built.

Our thinking is to potentially build something two story, 6000sqft total, rent the upstairs, use 2000sqft of the commercial space, and lease out 1000sqft to another business. So, we could end up owing about maybe 800k-1m. Which to me sounds crazy to type out, but i know for some folks out there on the west coast that's just a home loan. Rental rates are ~1.20sqft residential and $1.20 would be a very conservative estimate for the commercial space. So all in all cashflows of 7,200/mo maximum (not accounting for vacancy i know) including the rent we'd charge ourselves as tenants for 2000sqft of commercial space.

When I crunch the projected rental income vs mortgage, tax, building an emergency fund, etc. It seems far from a home run- almost like why bother. Am I missing something that will make this make sense?

As someone who's never been a property manager, or developed a property, does it sound like i'd be biting off more than i can chew to owe around a million, be a landlord with 3 residential tenants and a commercial tenant on the first go?

Landlording is definitely on my radar as a business i would like to enter. But i don't know if this would actually be the correct move. If not, what do I do with the property once we outgrow it? Add on to the existing old structure? Move and rent the current building? I'd assume if we sit on the property long enough it will become valuable, so does improving it actually speed that along or is it just taking a risk and potentially putting the ownership in jeopardy because things could go wrong with a big project and we'd default?