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June 23, 2009

Purchasing a Mixed-Use Gowanus

I am in the processes of purchasing a Mixed-Use Building on 3rd Ave between 8th and 9th (2 families over a store 3600 sq ft). It currently has an annual gross annual rent roll of $51,000.00. I negotiated the purchase price down to $625,000.00. The building is fairly in good condition. I'm concerned about the price, anyone have any opinions on this. Do you think the price is too high?

Comments

Not commenting on price or purchase. Just be sure you're aware of what effect Gowanus rezoning and Superfund debate might have on the building:
http://epa.gov/region2/superfund/npl/gowanus/
http://www.nyc.gov/html/dcp/html/gowanus/index.shtml
http://www.nyc.gov/html/dcp/pdf/gowanus/4_gowanus_land_use.pdf
http://www.nyc.gov/html/dcp/html/gowanus/gowanus4.shtml
http://www.nyc.gov/html/dcp/html/gowanus/presentation_0508.shtml
http://www.nytimes.com/2009/04/24/science/earth/24gowanus.html

Posted by: vinca at June 23, 2009 10:31 PM

Vinca, I think that the rezoning and discussion of the Superfund debate will improve the area overall and property values in the future. I have taken this into consideration. Thank you,

Posted by: Gowanus_Bklyn at June 23, 2009 11:50 PM

That's an 8% gross yield which is very good. What do all the other expenses (taxes, utilities, insurance) add up to???

I assume you know about the $150k income cutoff and how it affects the deductibility of accounting losses.

Posted by: daveinbedstuy at June 24, 2009 8:13 AM

And how large will the mortgage be and what will the payments be? You want to calculate the net return after all expenses against your total outlay of funds. If it's below 4.4% you might as well put your funds in 30 Year treasuries, risk free, with no headaches.

That said, the building it likely to increase in value over a theoretical 30 year period as well, something you have no way of knowing. Others will argue the likelihood of that happening and the real crazies will tell you that the Treasuries are not risk free!!!! :)

Posted by: daveinbedstuy at June 24, 2009 8:36 AM

The expenses on the building are minimual. Taxes are $2,028, Insurance is $2,456.00 a year, Water $2,100, Gas 2,400, and electricity for common areas is $1,000 a year.
I am only going to finance $350,000.00 tops on this building at a 7.128% interest rate with Flushing Savings Bank. What do you think Dave?

Posted by: Gowanus_Bklyn at June 24, 2009 10:57 AM

Minimal*

Posted by: Gowanus_Bklyn at June 24, 2009 11:14 AM

I like the word minimual -- wish it was real. minimal + mutual.

Anyway -- so 20% of your income is spent on standard expenses? Do you have room in your finances if ALL of these go up? (quite likely)

Posted by: tybur6 at June 24, 2009 2:51 PM

Oh... costs go up and rental income stays the same (also likely for the near-term, i.e., next few years)