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I am considering buying a older commercial building and convert it to a boarding house for low incomes, seller is father of one of my business partner, it is now occupy by RE office soon be out of business, location is the best spot in town, cross street is walgreen, nest door is a new Hamilton Inn and Remada Hotel, walking distances to Kroger.
I am thinking to convert it to a boarding house, 18 single room units, all utilities included for $100 to $130 per week, I will have onsite management live there free to overlook things.
Listing price $440,000, I offered $370,000 contract sale, seller financing no money down, 20 year amortization @6%, mortgage payment is 2650.80.
Coldwell Banker
Potential Gross Income Monthly Yearly
one bedroom at $100.00 $7,800.00 $93,600.00
Total Gross Income $7,800.00 $93,600.00
Vacancy
Vacancy Rate @ 10% $780.00 $9,360.00
Operating Expenses
Fixed
Property taxes $650.00 $7,800.00
Insurance $200.00 $2,400.00
Variable
Property management
Maintenance $600.00 $7,200.00
Legal Fees
Accounting fees
Advertising $125.00 $1,500.00
Administrative expenses
Extermination
Landscaping
Trash Removal $94.00 $1,128.00
Pool/ Recreational area maintenance
Utilities
- Sewer $300.00 $3,600.00
- Water $375.00 $4,500.00
- Cable $60.00 $60.00
- Electric $1,400.00 $16,800.00
Total Expenses $4,584.00 $54,348.00
Net Operating Income $3,216.00 $39,252.00
Mortgage
- First Mortgage $2,650.80 $31,809.60
- Second Mortgage
Profit or Lost $7,442.40
Reserve for Replacements
- Roof $2,000.00
- Siding $500.00
- HVAC units $500.00
- Water heaters $500.00
- Appliances $500.00
- Paint $500.00
- Windows & Doors $500.00
- Electrical system $500.00
- Non-carpet flooring $500.00
- Parking lot $500.00
Total Reserve $6,500.00
Net Proit or Lost $942.40
Ratios
Debt Coverage Ratio 1.23
Cap Rate 10.61%
Cash on Cash Return 74.42%
Break Even Point On Units 14.77
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