Physician office/condo for wife’s practice

[Austin Shelton]

Howdy BP, I’d be so grateful if I could get y’alls advice on a commercial condo space that I’m looking at for my wife’s medical practice in Conroe, TX (north Houston). Total square footage of unit is 2400 sqft. My wife’s clinic will occupy 1200 sqft and I want to lease the other 1200 sqft to an oil company that is ready to sign a 2 year lease (they currently occupy another 1200 sqft unit within the complex). Asking price is $150/sqft, totaling 360K. I have 160K saved to put down, so I’d have to finance the remaining 200K. P&I @ 5% would be approx $1,075.00 Rental rates are currently $19/sqft/yr (including CAM fees) totaling $22,800 or $1,900/monthly for 1200 sqft. Operating Expense estimates: Property Management 5% (~$1,100 annual) Vacancy 10% (~$2,200 annual) Insurance- not sure how to estimate but broker said that betterment and improvements is what’s needed, 1-3%?? (~$700 annual)? Maintenance/Repairs 5% (~$1,100 annual) Taxes- having a hard time comprehending info on appraisal district website but I’d estimate (~$4,500 annual) Total = $9,600 annual or $800 monthly NOI = 22,800 - 9,600 = 13,200 CAP Rate = 13,200/360,000 = 3.67% CoC = (13,200 - 12,900 annual debt service)/160,000 = 0.19% Monthly cash flow = 1,900 - (800 + 1,075) = $25 Not sure if I’m grossly overestimating the expenses, but according to the numbers this would be a horrible investment, from my limited knowledge of commercial investing. To make it work I’d either have to buy it for a heck of a lot cheaper or rent it for much more, and I don’t think there is much wiggle room with current market rates. I’d love your advice and suggestions! Thanks a ton.