Originally posted by @Frank Chin:
@William Walker
The main issue for me is if the property, a house, is zoned commercial. This is important for insurance purposes.
I had a triplex, rented to a couple. They had a home based business and its kind of iffy when it's operating in a residential zone. But originally it was only husband and wife involved and the business involved with no customers coming and going, so I left it alone. Later on, their business expanded, had employees, rented the unit below in addition, and I was advised that if you have a business, the property is zoned residential, a customer or employee had an accident, it is not covered under a residential insurance policy. A hairdresser would be a problem as they'll have customers.
As to zoning, my dad had a mixed used property in a residential zone, a zone with properties before zoning laws went into effect, and commercial use is grandfathered for him. In his case, he had a barber shop as tenant, legally allowed, and insurance is covered.
As to insurance rates, an office tenant is the lowest, bodega stores much higher, 3 times higher based on risks. A bodega is higher risk because they customers coming and going all day. So he rents mainly to tenants with little or no traffic, just needing office space.
You'll probably have trouble getting residential mortgages but check around.
Thank you for the reply
The property is zoned commercial
It’s 1,740 sq ft and divided in to 6 rental spaces, 5 are currently rented. 4 on a year lease and one is month to month. Current income is $1,700/month with one unit vacant.
It has been on the market for a long time, ~140 days. Asking price is 145k. It currently has a property management company that charges 10% of rent.
My primary concerns are: it’s a rather small town and I think somewhat limited applicant pool to fill the units.
the current owner pays water and electricity - I’ve asked for recent costs which the realtor is in the process of getting but it did not sound like a substantial amount. Said the hair salon has small volume of clients as the hair dresser is getting older, good for limited water use, bad for long term tenant. There are 2 half baths as well.
It’s got a new HVAC and roof, new exterior paint.
I’m going to your the property this week and get a feel for maintenance issues. I think I can offer a lower price given the days on market. Pending water/power costs numbers are okay at this point
