Charlene, my fiance, and I just spent our first night in our new building in downtown in Fairbanks, Alaska. It just so happened to be our fifth anniversary. This is our first commercial building. It is a 8300 sq ft building with 4000 sq ft of commercial space and three residential units. We moved into the unit on the third floor and will continue to lease the rest of the building. As our newly formed businesses grow and as leases expire, we will expand into the building. The sale also included two vacant lots.
This is amazing. So many things came together to make this possible. First, the asking price came down to a level that made the property interesting. The original asking price was $800,000. The sellers reduced their asking price to $700,000 and then again to $550,000. Second, interest rates are extremely low right now. My parents owned their home outright. I talked to them about their interest in getting a loan on their home at 4.5% and loaning that same money out a 8%. They agreed and we had our down payment funds of over $112,000 available. Third, we were prepared. We had all of our financials in order and prepared our paperwork for the banks that outlined our plan. We were offered a $440,000, 15 year, variable rate loan with a floor of 4.75% and a ceiling of 7.75%. Fourth, we recently refinanced our home on a 30 year note at 4.625% and were able to rent it out to cash flow +235/mo.
We paid the asking price of $550,000 and the property appraised for $610,000, so we have $60,000 in equity. The building currently breaks even on cash flow. The first floor commercial space has a lease that is far below market rent. When it expires in April, it will be raised by a minimum of $1000.
By making the move from our single family home to our new commercial building, we lowered our living expenses by $800/mo. Not to mention, now we are gaining an additional $2200/mo in equity by having other people pay our mortgage, just on our new building.
Here is the kicker…….With the two loans on the property, we were able to do all of this with only $2415.75 cash out of pocket.
I would like to thank Loral and the Live Out Loud community for all of their help. Without it, we would not have thought this was possible so soon.
Signing off from corporate headquarters,