good analysis..just few points.

very good analysis, just few points..

1. commercial rate on special use structures, about 6.5-7% midwest, CA usually gets 75 basis point discount.

2. commercial loan, usually expect 2.5% - 4% broker fee, plus closing cost.

3. 10 year lease without written option to extend, is somewhat short term to bank.

if I look at this building.

1. net income 96000, = 8% CAP.

2. base on 30% down, 5 year term, 20 year amortizing, monthly outlay is 5964, or 71568 / year, net 24432./year.

3. lets say closing about 4% of loan amount, $33600.

4. cash on cash be, 24432/(400000+33600) = 5.63%

5. balloon at 10 years is 525,291.

6. principle pay down at 10 year = 314709

7. net inflow = 24432*10+314709 = 559029.

now, base on my limited understanding of CRE, value of CRE is much base on length of lease term, most restaurant will occupy a builder about 25 years, after that, either complete tear down rebuild or move.

so, if this building is close to that time limited, the option to extend is somewhat in limbo.

but if we say it sold for 1mil at end of 10 years. net after commission, about 400k

so, 10 year cash in flow is 959k, less 436k investment, net about 525k

not bad, not best, but its all hands free.