Hi thank you all for the response. To answer the questions on here, at this point were are already in the process of the deal and put down a down payment, contingent upon mortgage, thus I don't think it would make any sense to get a commercial broker.
Regarding appraisal, the building will be appraised by the end of this week and we expect it to be in line with around $750k-$800k.
Regarding location, this building is located in a suburban area, and the new location would be a lot better than the old. The building is a lot newer 1950 vs renovation 1980, this is through the SBA loan thus the low down payment. My business will be taking up 50% of the retail space, and the building is a commercial retail space. Regarding recourse, I'm not 100% sure are SBA 504 loans usually recourse or non recourse? and I think with the bank loan there is no pre-payment penalty, however with the SBA aspect there is a prepayment penalty.
I'm working with a mortgage broker and he has been helping me with creating projections for the property, provided below.
Estimated Revenue:
Effective Gross Revenue: $104,279
Estimated Operating Expense:
Total Expense: $36,213
NOI: $68,066
Value: $825,041
First Mortgage Debt Service: $28,469
DSCR 2.39
CFADS 39,597
LTV 45.5%
SBA Mortgage Debt Service: $24,058
DSCR: 1.65
CFADS: 15,539
LTV: 81.8
To be honest I was looking at how much we would be paying at our current lease vs how much we would be paying for our mortgage, I was estimating our mortgage would come out to around 7k-8k, and with us paying 4k for our current upcoming lease and the tenants paying 3k currently, which I expect to raise to around 3.5k for current market rate.
Based upon comparable, the two buildings above I think would work well as the first one mentioned is right across the street from this building. And building 2 is about a 3 min drive as well.
BLDG1 Comparable: Sale $400,000/5,000 sqft= $80 per sq ft, but complete gut renovation needed
BLDG2 Comparable: Sale $315,000+ $400,000 (quote I received for brand new construction of building)/ 6,000 sq ft= $119.00
Building I'm considering: Sale $750,000/ 7350 sq ft= $102 sq ft (this building is move in ready, with no renovation needed)
Is this the way to do comparable sales?
Also the estimates I've come up with through my research is that average NNN rates go for around $14-$20, one of the tenants is currently paying $15 NNN, however one is only paying $11 NNN which I think can be raised to $14 NNN when the lease ends which would bring in an additional estimate of $400 a month.
So basically I made my decision on the fact that it didn't make sense to pay the upcoming lease of $4,000 monthly for around 2,800 sq ft which comes around to $1.42 sq ft, when I could pay around $4,000 monthly for 3,200 sq ft which comes out to around $1.25 sq ft. Also this building was completely renovated in the 1980 and is in great shape with no expected renovations needed vs our current location which was build in the 1950's with no renovation and bare minimum upkeep during this time.
I also translated this to that if I stayed my new NNN lease would come out to $17, but with the new building it would come out to around $15 NNN.
So what do you think?
