Looking at commercial building in Maine - need input

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Hello all,

First (and long) post.

This is a general shout-out to the more seasoned investors out there, from Maine in particular. I’m looking at the numbers on a 2-story commercial building in my town (Dover-Foxcroft, Piscataquis County). It has 4 shops and an efficiency apartment on the first floor, and unfinished space upstairs with inside stair access, a cargo elevator and potential to build exterior stair access. I’m interested in it because all of the ground floor is occupied with below market rents by a print shop, sign shop and laundromat with 17 washers & 18 dryers (which is owned by the building owner). The upstairs looks like it would hold 4 high-end 1 BR apartments, but would need the works: insulation, inner wall framing, plumbing, electrical, complete interior finishing and appliances. The board of planning has already tentatively approved a combined commercial-residential zoning because of a full sprinkler system already in place on both floors. It is the only laundromat in a town of 4000, with more summer from summer visitors to the nearby lakes and state park. A grocery store is conveniently located across the street and a health-food/garden center/gift shop is a quick walk away. A nearby mill was retrofitted by investors with high-end apartments that are all leased for 650-950/mo for 780-1050 sf per unit. The mill tenants pay electric and heat and have an elevator and view of river. My imagined tenants would have no view or human elevator, and I would have to sub-meter the electric and heat as it was installed. Currently the owner pays electric, water & sewer and propane forced-air heat. Commercial tenants pay propane heating for water. There is a basement access through one shop that could work for storage or working area.

I’d love to own (and manage) the laundromat and some nice apartments. The current owner only wants to be a tenant operating one of the other shops but had to buy the whole building as a package deal. I think the rents are low, and utilities could also be metered out, but I’m not sure what the market will bear in the poorest county in Maine (it is the county seat, with some visitor attraction—lakes, whoopie pie festival), and supposedly there is a demand for better rental units, self-storage and store fronts, but there is a lot of vacant, run-down property here as well. No population growth or property value growth on average. I’m looking for long-term cash flow, as I’m still raising my kids here and have no plans to move. I would like to improve the community somewhat at the same time.

As far as I can tell, the current owner is bleeding cash. But at his current asking price, $237,000, I cannot make the building cash flowing even with best-guess scenarios in the BP Rental calculator. Current income (if ALL rented) is $2600/mo including laundromat net. But currently a "friend" stays rent free/lease free in the apartment and owner runs one shop (would stay as a tenant but suggested rents that seem really low. I'm guessing $125k to finish the upstairs, just to put some numbers to it, but it could be double that. At a $220,000 offer price, IF my numbers are correct, I'd only be doing a 5% ROI. I'd be happy to share the BP Rental pdf, but am not sure how to post it, or if that's OK.

Questions:

• List price, as mentioned above, is $237,000.  Zillow has the former purchase price at $225,000—five years ago. The town’s property card assesses the property at $130,100 and lists the sale price at $132,525, five years ago. So what did the current owner really pay? What he paid may have a big influence on what he’d accept. 
• Am I nuts in thinking I can create 4 apartments for $125,000?
• I’m at risk of wishful thinking. Would cool-headed investors out there consider this worth researching further or making an initial offer on to begin negotiations on?

Thanks for any comments you have!