First Commercial Real Estate Investment

[Ra B.]

Hey All BP Forum People,

Happy New Year! 

I have been listening to the podcasts and educating myself. Now time to put all that into practice. 

I have located a commercial office building in a Minneapolis suburb. Asking price is $4.5M at $186/sq ft. Nets $307K (NNN lease) in rent. By using the Property Cashflow Analyzer, I get only 6.45% CAP rate and 7% Cash on Cash. My criteria is 16% cash-on-cash and 9% cap for such investment. So thinking about offering $3.4 M.

Is this a good deal? What are the risks for such building. Its a 30 year old building with 90% occupancy (around 10 commercial tenants like dentist, software companies etc.) with leases ranging from 2019-2023. 

Thoughts?

Rabi