Am I missing aything on Mixed use deal?

[Darren Flater]

there is a mixed use building in my hometown that has been open for three years. I found out threw two friends of mine that there is two businesses that have asked to lease it but the current owner wont lease. they asked me if i would consider buying it and leasing it back to them. It has four apartments upstairs and a 4000 sq ft store front. it has not been updated in over 20 yrs. that's right up my ally and i really enjoy that building. here is the stats

Asking price $85000

Electrical update to code, bid for $23000 owner says she would pay $10000

Apartments would take around $10000 each to update

Need a new roof and furnace in 5-10 years

current rents with new tenant will be around $2400 all updated could bring around $3000.

Water, electricity, gas run about $600/m

Id love to get it at $60000 and plan to update apartments as tenants move out with a goal of being fully renovated in 5 years. ARV would be around $155,000

what other things should i think about with a mixed use building? I think this deal would be a great long term hold.

[Marshall Downs]

Hey Darren,

With anything commercial you have to factor taxes and insurance as they will be more than SFR. Additionally, some sort of vacancy projection should be used in the inevitable event that you are between renters or someone does not pay. Maintenance should also be accounted for. Lastly, as you alluded to a reserve account should be set up for longer term items such as roof and furnace. Figure these numbers in and see if cash flow is still strong. I once heard someone say it should cash flow from day one and I am a sinc believer in that. No "appreciation only" buys. Good luck!

[Darren Flater]

thanks Marshall. From what I see after all exspenses and T&I I would cash flow $500 Thats after 50% towards reserves for long term like roof and furnace. I talked with my banker and it looks like I could buy this property with very little out of pocket because of equity I have built up. The building has separated meeters for elrectric which the current owners pay for. That would save me almost $400 per month.