I mentioned last week that I was investigating doing flips in Modesto, Ca. And while poking around the internet to see what people think is happening, and what is actually happening I trundled across what initially seemed like a super exciting commercial property.
Here’s the initial Craigslist posting:
$2500000 Full City Block in Downtown Modesto (500 N. Ninth Street)
© craigslist – Map data © OpenStreetMap
(google map) (yahoo map)
0BR apartment available jun 10
Chech this out! A full city block, 2.75 acres with good income in a prime area of downtown Modesto. This is a great property for the long term invester and/or developer. Only two blocks from the Gallo Performing Arts Center and across the street from the Modesto Police Department.It has good income now which makes it easy to hold. Current income is about $250,000.00/Yr but has been as high as $400,000.00. Zoning permits almost anything you want to do. A multi-use highrise development would be Ideal. This a real bargain by any measure. BRE# 00579042
So just to throw a couple of numbers out there:
- Sales Price: 2,500,000
- NOI (assuming NNN): $250,000
- Cap Rate: 10%
- Debt Service (With 30% Down Amortized 30years, balloon at 15): ~$75,000
- Seller Carryback at 20% (6 years, 1st year Interest Only)
- COC Return ~$75,000 (first 6 years) / $300,000 (10% + CC) = 25%
- Year 7: Cashflow increases to $175,000!
That my friends is my ballpark! I’ll play there everyday of the week. WITHOUT DOING ANYTHING BUT KEEPING UP MY PAYMENTS I GIVE MYSELF a 133% raise in 7 years. If the leases are NNN, with a CPI adjustment in 7 years the property is worth more than what I am paying for and everything is awesome!
Well, then I hit the internet to look it up:
It looks new, looks like it’s got a full parking lot. A quick search shows that there’s a Doctors Office, a Collection Agency, and a Governmental Agency! Dollar signs are filling my eyes! Life is good. I’ve struck a home run! Now to talk to the broker and get some more information.