Happy New Year to anyone who happens to read this.
I met with a friend of mine who is a RE Broker yesterday about a property I've had my eyes on for some time. It is a commercial property consisting of two buildings. An 810 sqft building leased at $700 a month as a local flower shop. The other building is 2772 sqft, has been empty for a few years (casulty of a Country Time Mortgage site). I actually inquired about the space over a year ago as I was looking for a space to lease for a Physical Therapy practice, my primary occupation. At the time, couldn't get a loan from the bank without $40K down, so I put the project on the back burner. Eventually, a local investor purchased the property for $150K according to the county property sales info. Its currently listed at $205K.
I might be able to get the property at $190K + $5K down, 30 year mortgage with owner financing at 7% through a land contract with a 7 year balloon.
My plan is to put my PT clinic in there and lease the space to my therapy practice for $2500 a month. So, the property should be generating $3200 gross rent a month. Taxes are $4K a year and insurance would be about $800 a year so that would add another $400 a month to the mortgage of about $1264 to equal $1664, for a net of $1536 a month, or $18432 a year back to me. I also think there would be benefits of depreciation of the buildings that would be tax benefits as well.
I have an accountant but I don't yet have an attorney. This would be my first deal. I plan on this being a buy and hold since I will be practicing in the larger space.
Any suggestions for things that should be included in the land contract and any other advice is welcome. For instance, I am thinking it would makes sense say after a year or so to refinance it traditionally through a bank at a lower rate as long as they stay there. From what I understand with the 7 year balloon, I have 7 years to do so and fully pay of the investor.
Thanks for your help and suggestions...hope 2011 is great for everyone!