Resi over retail deal- HELP!?

[Andrew Ramler]

Hey BP,

I am looking at a Dallas deal with 4 resi lofts (3500sf) over 6200SF of retail. I have a good understand of multifamily but the retail would be new for me. I have listed some questions as well as the numbers below.

On retail tenant pays insurance and taxes in “nets” on top of their market rents. How do nets work anything stick out I should know (ie how are they distributed, legal obligations, do they raise through the lease?)

The retail is currently empty and divided into 2 suites; can I break them into more suites or make it one?

Can I turn retail section into resi or vice versa?

This is a vintage 1920’s property and thus has minimal parking outside of street parking. Is it possible the city will require me to have a certain number per sf?

Who typically handles interior maintenance and remodel on retail (landlord or tenant?)?

Any other red flags or major difference between resi and retail I should be thinking about?

Below are the Annual numbers

Price- 650k

Resi Income 38,400

Retail 74,400 ($12 a foot)

Nets 12,400 ($2 a foot)

Total Income 125,200

Vacancy 12,520 (10%)

Gross effective Income- 112,680

Tax and Insurance- 12,400 (nets)

Management 6,260 Self manage for 5 %

Upkeep 13000 (2% of property value)

NOI- 81,020

Payment $39,118 (25% down, 20 year term at 5% interest)

Cash Flow- 41,902

Cap Rate 12.46