Advice, Commercial RE, sell or cash out to buy another property

[Chris Wallace]

I'm Trying to give a complete picture so I can tap into this great resource of BP.  

I own a commercial property, no mortgage. Two appraisals 3 years ago $1.8MM. Raleigh NC, so unlikely to have gone down

Rent $10,400/mo (2% annual increases). Tenant is original to the building, original lease started in 2003. Current lease 2014 – 2019 with two 5 year options. Fair market rent with process in place if we can’t agree on rent at each renewal.

Landlord responsible for roof and structure only. New roof 2 years ago ($45k).

Credit score 800+. I keep approximately $75K in cash.

Made $85-100k taxable last 5 years self employed outside of CRE. Transitioning to more and more RE until I sail away.

Personal Ohio residence has no mortgage. Total debt service non business related $1K/mo. No business debt.

Looking for minimum or no LL responsibility except maybe a lease negotiation, paying loans and cashing checks.

Would you attempt to sell current property or borrow against it?  If I borrow against it:

Assumptions: 8% cap rate $1.56MM value.  It may be worth more but always trying to underestimate.

20 year amortization @ 5% (Can I get this loan fully amortized?)

Borrowing 700K - 1MM from current property leaving DSCR (ranging 2 - 1.44), Use this money as a down payment on the next and to beef up cash reserves.

Chris