[Calc Review] This is an 18 room commercial

[Devon Cornwall]

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*This link comes directly from our calculators, based on information input by the member who posted.

This property was happened across on pure luck, the numbers used are the givens by the listing agent. Seller is willing to carry financing. Is this a deal too good to pass up? Or am I not including the possibilities of additional losses?

From LA: "18 ROOM - ROOMING HOUSE WITH COMMERCIAL FRONT - LOCATED IN THE DOWNTOWN AREA - EXCELLENT RATE OF RETURN! MANY RECENT IMPROVEMENTS INCLUDING - UPGRADED ROOF ($30,000.00)-2 YEARS - WINDOWS UPGRADED 8-9 YEARS AGO - 2 WATER HEATERS, FIRE INSPECTION COMPLETED - AND MANY MORE IMPROVEMENTS - BUILDING IS IN A EXCELLENT RATE OF RETURN - BUYER MUST ASSUME FORGIVE ABLE LOAN HELD BY CMHC IN THE APPROX. AMOUNT OF $32000.00 AND EXPIRES IN THE YEAR OF 2023 INCOME AND EXPENSE AVAILABLE - OWNER WILL ASSIST IN FINANCING IF NECESSARY - DON'T MISS OUT ON THIS TRULY RARE FIND!! BUILDING IS KNOWN AS THE ABIDING HOUSE"

This is in Ontario, Canada. So any Canadians out there with insight would be great. :)

Thanks again,

Devon

[Taylor Servais]

The true management fee should be higher (10-15%+). You'll have 2x the turnover, pest problems, maintenance, and deal with more bs. 

The return is not good enough to justify your time. Long-term financing of this asset is a pain. Liquidity is also an issue (as highlighted by the seller's willingness to do a VTB.

The asset seems like it was or could be a 4-6 unit building (most likely highest and best use). What's the stabilized cost of this type of asset in the market?  $300k? Deduct the cost to convert to this use... Pretty soon becomes uneconomical.

Another quick way to look at it is on a price per square foot basis. Doesn't tell you the full picture, but provides a quick benchmark. 41 fourth is ~4,600 sf or $100/sf. 151-157 is 11,000 sf or $45/sf. Why the big discrepancy? Just some things to think about.

Unless you can get minimum 20% cash on cash with attractive term on your financing I wouldn't even entertain it.