Next property? What would you do?

[Greg Robinson]

Currently looking two properties first is a mixed multi-unit 5 plex with a commercial space that requires some lots of TLC in a small northern Ontario market. 

Purchase price is $15,000 and we plan on putting in $65,000 to $75,000 in renovation material and lots of sweat equity.  New shingles, several windows, re-level two second story apartments, new exterior entrances, three kitchens, three washrooms, flooring, drywall and paint, etc.

We would consider two of the units habitable at the moment (even though three units are occupied), one is barely habitable, one apartment had a fire and requires refinishing and the commercial space is vacant and dated.

Our goal would be to rehab the unit that was damaged by fire, then renovate one of the units currently tenanted and finally gut and divide the commercial space into two one bedroom units giving us a very nice six plex when completed.

After plugging in income/ expenses and adding 8% for each vacancy, management and maintenance we end up with $100 cash flow as is and conservatively calculated $1600+ net cash flow once renos are completed if we do not refinance.

At a 15% cap rate Value would be in the $135,000 to $150,000 value range.

The  second property is actually kittycorner to this property via a back lane and is a completely finished fully rented fiveplex.  Asking price is $179,000 and we would need to buy at $150,000 with 20% down and 4% financing to make it viable.  Property should cash flow between $1100 and $1200 per month after mortgage costs.

Would like to hear which you would choose and why?  Or would you choose to do something totally different?