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Someone Buy These Two and Make Them Beautiful Again

Normally I feature properties with substantially more glamor than this installment. You need a bit of vision to see the potential in these two raggedy storefront properties at 188 and 192 Grant Street.  They are for sale at the asking price of $150K each.  The owner will sell them as a package or individually.  Each has two apartments and a storefront for six total units.

The neighborhood is equally ragged but is seeing a noticeable resurgence.  The surrounding streets also compose the heart of Buffalo’s new refugee immigrant renaissance with much of the dense walkable urban fabric still intact.  That means there is great upside potential for Grant Street and this part of Buffalo.   With that necessary vision I talked about, the right owner can do a great service for Buffalo by bringing life back to these once charming buildings and perhaps can pocket a modest financial gain in the process.

Let’s look at the money. If you paid the $150K each asking price and invested an additional$75K into each building with a 20% down payment your monthly mortgage and interest would be $1,824 per month at 4.5% interest over 30 years.  Add in insurance, taxes, and a maintenance fund for a $2,6oo monthly outflow.

Lets assume that the newly renovated apartments take in a conservative $850 each per month for a monthly take of  $3,400.  Take off $100 for vacancies to give a gross monthly apartment rental income of $3,300. Storefronts can be tricky to keep rented so let’s be very conservative and say they gross just $500 a month total.  That brings our monthly gross income to $3,800.

$3,800 – $2,600 = $1,200 / month net or, a modest 14,400 income per year.  Another way to look at this is as an annual return of 18% on your 20% down payment plus the equity that your tenants are paying for.

Of course my math and assumptions could be wrong and I know the crack dealers, and blah blah blah.

Vision.

 

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  • Johnny Pizza

    “Of course my math and assumptions could be wrong”
    Actually, I’d say not bad. You might be a little light on maintenance and vacancy, but even using some more conservative figures I’d say you could be 10 – 12% which is within the range of market return for an investor. I’m a fan of including a rough breakdown like this, it gives a sense of feasibility to the opportunities and bolsters your argument.

    • Ivan Putski Jr

      agreed about the figures. a pretty fair analysis except I might venture the repair costs could go over the 75k allowance. both units need entire exterior work (including replacing clapboards or new siding …hard to tell from the pictures what it currently is…and potentially a new roof) those are major costs (roofing shingles have nearly doubled in price in the last 10 years) so you have to hope the interior is just cosmetic updates. which is often but not always the case with these older homes. plumbing might be ok but i guarantee if these haven’t been sold recently the electric is all out of code. again not a huge deal but it adds up quickly

  • kkinan

    two units at 850 each + 500 for a storefront = $2200.

    • Johnny Pizza

      Two apartment units per building = 850 x 2 units x 2 buildings = $3,400. Add to that $250.00 per month each for a storefront which is incredibly cheap to get $3,900.

  • Captain Picard

    Your numbers actually make a lot of sense and are a good argument for reinvestment in this area.

    Another calm and collected piece by Steel. What’s the world coming to?

  • sabills

    Man, doing this sort of thing is a dream for me. Not in a place financially where its viable at the moment, but maybe someday.

  • Fly Street

    You should account for a maintenance fund, insurance (beyond escrow as an investment property) garbage, water and some utilities as these rents need to be made attractive in this area. Also if there is a way to provide off street parking, maybe you could monetize that… Point is, that i have done this for ten years, and this equation is a little too simplistic.

  • David A. Steele

    Actually I think I forgot to subtract the down payment out of the mortgage so my math is showing your return on 0$ invested!

    • Johnny Pizza

      I ran the math myself and you did subtract the down payment from the mortgage. $300k purchase + $150k renovation = $450k total cost less 20% or $90k for a loan of $360k. Take that $360k at 4.5% and 30 years amortization you have a monthly pmt of $1,824.
      If you had $0 invested you could not calculate the return because you cannot divide by 0. Your original math all added up by my check. Nice article btw.

  • FreedomCM

    SBA loans are around 6.5% now, add in commercial insurance (~1.5%?), taxes (~1.5%), maintenance/property management (10%, unless you are going to shovel every morning at 6am and fix the leaking toilet on memorial day, plus run credit checks on dodgy renters), and most landords put vacancy at 5%-10% for multi-units (don’t know about retail).

    So now you are talking needing 20% rent rolel on your $450k investment, $7500/month.

    If you are willing to sweat equity the management, maintenance, and get lucky on vacancy, maybe only $5k/month to break even and bet on appreciation.

    • David A. Steele

      Why use a small business loan to buy real estate? That makes no sense.

      • FreedomCM

        Most lenders will evaluate the financing package on real estate based on specific underwriting guidelines, and almost all lenders use similar or the same guidelines. Your question about the type of loan you will have to secure has more to do with the lender who you ultimately apply for financing will dictate. However, if experience serves as a guideline, the answers by the other responders are in line with that experience. You may find a lender who can do a residential loan on such a property, however, the brunt of the lenders who see the classification of the property — in this case probably a “NC” (neighborhood commercial) or even as a mixed-use property (commercial bottom floor), will require a commercial type loan. The difference between that one and a residential one will be seen in your equity participation — down payment, and the terms, and certainly the interest rate you will ultimately be offered. Residential will typically be for 30+ year and a rate that is prevelant in today’s market, the commercial will be for a shorter term with a slightly higher rate, and a much larger down payment. You would be well served to bring this question to a mortgage broker that handles both types of properties so that you can ultimately compare and evaluate what works best given thise parameter.

        https://www.trulia.com/voices/Home_Buying/Is_a_commercial_loan_required_on_a_mixed_use_prope-261468

  • benfranklin

    Thirty yeas ago the men of the west side would play cards in 188. That I know for a fact. I was told they had a poured concrete floor to eliminate listening devices placed in the basement. That I don’t know for sure. The FBI did record happenings at 222 Grant, so it wasn’t crazy for them to be suspicious.

  • BuffaloGals

    How big are the storefronts?