Need help on 20 door complex

[David Schwan]

I am looking at a 20 door complex and it seems like a good deal but I am not sure if I am doing the math correctly. My question is how does a lender value commercial properties. Here are some of the details. Please respond with any questions that you have.

property consist of 10 duplex (20 doors) 

Asking price is $400k

Estimated expenses of $4500 per month excluding the mortgage. Taxes, Insurance, Vacancy, Repairs, CapEx, Management and misc.

This is a C property that is 40yrs old and needs about 20k in upgrades. it is currently 95% occupied with that being the current 12mo average. I am not sure what other questions you might have but reply and I will answer the best I can.

Thank you,

David

[Andrew Johnson]

David Schwan I think you should break down how you get to the $4,500 in expenses per month. If the current owner hasn’t painted or kept up landscaping (your $1K per unit budget) there’s a darn good chance there’s deferred maintenance. Especially on a 40 year old property you’ll hit issues. The reason why “paint and landscaping” worry me is that they are the cheapest possible things to do to maintain some appeal in the property. If the owner can’t stomach tree trimming and painting costs, there are likely man larger costs they can’t stomach also.

And I’d be curious if you called for a quote on insurance. My (limited) experience is that the cheapest commercial property insurance companies sometimes avoid duplexes. So your 10-duplex 20-unit property might be a lot more to insure per year than my 27-unit single-building.