All Forum Posts by: Dharmesh B.

Hi,

Commercial real estate deal analysis is hurting my head. I think I am close but not sure. Will you please analyze this deal and confirm if I my process/analysis is right? Feel free to share where I’m messing up.

Office is in a building where there are other office units owned by someone else. This specific unit is for sale. The office space is large enough where it has 4-5 office cubes and 1-2 conference rooms (2220 sq ft).

Base rate broker shared was $15/sqft/yr but I am being little cautious and using $13/sqft/yr in my calculation. Since the property has been vacant for last 6-12 months there’s no rent roll. Owner moved to a larger space as they experienced growth in their business.

Assuming I will be able to find a NNN lease tenant (learned that's what it is called where tenant pays the operating expenses).

Office association charges monthly payment that covers 100% utilities and CAM. Added this in my Utilities line item.

Is this a good offer, $350,000 for listing price of $400,000? Cap Rate is very low even though it shows good CoC and IRR.

@Bennet Sebastian DM sent. Appreciate it!

@Eric Johnson Thanks for commenting! I will certainly reach out when I have another deal. Previously, was able to find a lender who was doing 20yrs amortization with no balloon payment. Loan terms were good but numbers didn’t work out after analyzing the deal.

One question though. For a commercial loan that may have 30 yrs amortization with 5 yr balloon payment, would the bank renew/extend the loan after 5 yrs or enforce to make the balloon payment. I doubt I’d have enough money to make the balloon payment.

@Timothy Hero It was around $600k. I finally figured out the analysis, and didn’t make an offer because the numbers didn’t work. Thanks for commenting!

@Bennet Sebastian thanks for confirming. I don't have a target IRR. It hurts my head to understand it, but will keep trying.

Hi,

I came across a 2200 sq ft office space listed for $400k.

It would be our first RE investment. Wondering how to analyze this deal. Here’s what I’m thinking

- Calculate commercial loan terms

- Add operating expenses

- Add any fixes

For income, calculate annual income based on local lease rates (broker mentioned they are $15-16/sq ft /year).

Figure out cash flow, cash on cash, etc.

Is this the right way or am I missing something?

Please advise.

Best,

Dharmesh

@Joseph Firmin Thanks for responding with a suggestion. I will follow that and get back with any questions I may have

Hi,

Hope you are doing well.

I am buying a rental property with 6-10 units using a commercial loan. This is my first deal and little fuzzy with how to account for monthly payments in my deal analysis.

I understand deal analysis with residential loan, so not completely new.

I searched on the net and got a bit of clarity but couldn’t find a good sample deal to understand better.

Would you please help me walk through a deal or share any spreadsheet of a similar deal and financing scenario?

Best,

Dharmesh

Thanks for sharing your ideas. LLC is the route that we discussed. However, I am not sure what's a fair return. He mentioned either interest or profit but not both. He is also flexible and open for suggestions. So, I wanted to see how it's typically done.

@Frank Patalano I'm looking to partner with a house flipper by funding the repairs. Opportunity is to get to learn the process.

What's holding me back is the lack of knowledge to protect my funds as well as knowing what's a fair deal since I'll be funding partially and be lightly involved as I'm learning. Percentage on my dollars or percentage of profit or a bit of both, what that would look like.