18 units - $230k... really?

[Nathan Emmert]

So I'm looking at this building. It's in a podunk little town about 3 hrs North of me. Owners have had a terrible time getting it managed properly (probably cause it's in podunk USA) and are just looking to get out, say they need $230k.

The building is 18 units, a mix of studio, one, and 2 bedroom units for a total of 23 bedrooms and 19 bathrooms. Apparently 9 of the units are currently occupied and per the seller occupancy goes up during the summer with some temp workers that come into the area.

Per City data, average rents in Podunk USA are $572 (15% lower than the area I currently invest in).

So if I accept $230k as fair, I would mortgage $172,500 (75% LTV) for a payment of $1,090 (6.5% for 30 years, is that reasonable for commercial?). That basically means I need to keep 5 (of 18) units rented at $400 a month to break even on this place? Can that really be right? What am I missing on something like this?

Also, how do banks treat "subject to" owner financing? The sellers have $85,000 on a mortgage they could pass to me so I would only need a new mortgage for $145,000. Would I only be able to get a new mortgage for $90,000 to get me up to 75% LTV (assuming we get a $230k appraisal). Would the subject to financing remain in 1st position meaning the $90,000 (or $145,000) would be 2nd? Assuming it is, what sort of terms could I expect on that $90,000? Sorry, not real familiar with partial owner financing like that, especially as a subject to.

It could be an interesting opportunity, curious to hear your thoughts.