Mixed Use Deal?

[Justin Biggs]

I'm working with Jerry Puckett on a yellow letter campaign targeting SFH absentee owners.

One caller had a SFH I wasn't really interested in but has a mixed use building he is selling that I am interested in. I'm going to look at it this weekend. I've only owned SFH rentals so far and am not quite sure how to value this / what questions to ask this weekend.

Here is what I know:

Asking Price: $200k (this is listed with realtor.  Originally listed for $299k, current list is $239k but he told me he would take $200k).

Rents: 6 1BR/1BA apartments up @ $400/ea.  3 commercial spaces down (all used by 1 biz) @ $1200/mo.  Total rents $3600/mo.  Building currently 100% occupied.

Expenses: Owner pays all utilities for apartments.  He is getting some numbers together.

My Analysis: $3600/mo - $1800 (est. expenses) = $1800.  I can get a 15yr fixed on this @ 4.95% with no points ($1200 payment).  $1800-$1200 = $600/mo cashflow.

Questions: How are mixed use building generally valued?  I'm a little concerned about 1/1 apartments being very transient.  What other questions should I ask this weekend?

[Justin Biggs]

Saw this property over the weekend and got some additional financial info.

The owner and his wife owned this building.  His wife did all the management but she passed away about 2 years ago.  Since then, the husband has been half-heartedly managing this and is looking to get this off his plate (he has another non-real estate business).

The building is all brick and has newer electrical.  The downstairs (commercial) is updated with new windows.  All 3 commercial spaces are rented by 1 business.

The upstairs is rough.  The apartments all have older windows, carpet and appliances.  Could definitely use some updating.  His rents are the cheapest in town, so vacancies fill quickly.

2016 Gross Rents: $36,550.00

2016 Expenses (Water, Trash, Electric, Legal & Insurance): $6104.00

Taxes are about $6k/year

I don't love this deal @ $200k but I know there's a lot of motivation.  They had 1 offer (made sight unseen) and it was withdrawn after they took a walk through.  Any suggestions on where to start with an offer?  Should I ask him for his bottom dollar price before throwing out the first number?