First-time commercial real estate buyer - need help
Hi, 

Before I begin I'd like you to know that English is my 3rd language, so please forgive me if I make a grammatical mistake. 

I have a business in a building for a little over three years. The landlord is listing the building for sale, and the asking price is $183k 

Here are some numbers I have
1) $/Ft = 14.57 
2) G.L.A. SQ.FT = 1,200 
[700 + 500] 
2) Net Income from building = $3,600
[Gross Rents -  Owner Expense] 
3) Gross Projected Value = $45,000  
[3,600 x 8% Cap Rate] 

Other important factors to consider 
1) The neighbor is at 100% capacity 
2) Two buildings next to me has spent over 500k on each property for renovation
3) A growing arts community 
4) Do not wish to put more than $35k (including closing cost) $40 max.
5) The building is NOT in dire need of renovation/maintenance - the owner has not spent anything on building maintenance the last 3 years I have occupied the location. It's a reasonably solid building. 
6) I estimate to fix some roofing/HAVOC/basement to be around $30k - $40 (max)  
7) I plan on financing the building 

Questions 
1) What should my first counter offer be?  
2) What should be my target buying price? 
3) What should be my resistant/buying price? 

Thanks in advance. 
[{"id": "dneqlhj", "text": "Net income is 3600 per year?? What expenses are you including?", "replies": [{"id": "dnerud6", "text": "After doing some calculations it's only $1,200. \n\nLet me try to explain: \n\nThe building I am buying has two units. My unit is 700sq that I pay $850 per month, and the next door unit that's about 500sq that he pays $650 per month. \n\nEstimate expense per year for the building owner is: Utilities ($2,400), Taxes ($2,720), Insurance ($700), Vacancy Factor 5% ($390), Building/structure &amp; Roof - 5% ($390). Total $6,600  \n\nEstimate rent I can collect if I become a building owner is $7,800. That's $650 x 12. Therefore $1,200. \n\n\nDoes that make sense?\n", "replies": [{"id": "dnes1x5", "text": "No, you wouldn't discount the building just because you choose not to pay yourself rent. \n\nUsing your expenses, that's a net annual income of 11400. If 8% is the prevailing cap rate, you're at 142,500 as a fair value. ", "replies": [{"id": "dnesxyv", "text": "Thanks, \n\nIf I understand you correctly, I should include my rent in my Gross Rents? But if that's the case it would be a net Income of $10,380 ($18,000 - $7,620 increased from 5% )  and a 8%  Cap Rate is $129,750. How do you get $142,500? \n", "replies": [{"id": "dnet8n5", "text": "I used your 6600 expense figure. ", "replies": [{"id": "dnetp2p", "text": "Ahhh... well the $6,660 is when gross rent is without my rent. But if I include my rent in my Gross Rent then the total expense will be $7,620. If my calculations are correct, should my value be $129,750? Or did I miscalculate? \n\nThanks. ", "replies": [{"id": "dnev8hv", "text": "Based on that expense figure, that's a correct calculation. What is the expense increase you are adding when you include your rent? ", "replies": [{"id": "dnez3bs", "text": "The 5% rate of $18,000 for 1) Vacancy Factor = 5% of *Gross Rents and 2) 5% Building Structure n Roof Maint. \n\n\n\n*Gross Rent = $18,000 if include my rent ", "replies": [{"id": "dnf00vo", "text": "Gotcha.  Maintenance costs wouldn't change based on gross rent, so your previous figure of $6,600 was probably unreasonably low.", "replies": [], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dnerr6t", "text": "Wait, are the neighbors' buildings comparable? I mean 500k in renovations on a 183k building seems absolutely insane. I mean I don't have much experience with commercial buildings, but I do have experience with residential, and am regularly doing 4-10 remodels a month. They are a fraction of the overall price, not 2.5 times the value. ", "replies": [{"id": "dneteca", "text": "Good question. The answer is NO. My building is a 1 story with an estimated space for rent is 1,500 sqft. The buildings that are next to me are over 4,000 sqf because they have 2 stories. \n\nOne building was sold for $180 about 10-years ago. It has over 4,000 sqft. They've spent over $500k because it was basically a gut job. \n\nThe other building next to me has a similar size building was sold for $320k less than a year ago, it was only on the market for 1 month. They spent over 300k-400k because the building was not incode for residents like only one heater for 3 businesses and 2 resident tenants and some weird structure. \n\nAll the buildings here are over 100 years old. ", "replies": [], "depth": 2}], "depth": 1}, {"id": "dneyy9z", "text": "A couple questions: are the rents you and the adjacent unit paying at market? What do comparable builds sell for price per foot? Replacement cost? I would look at your current occupancy costs and compare them to the cost if you bought the building. If it makes sense for you to keep renting then do that and buy a completely different investment. ", "replies": [{"id": "dnlg8xb", "text": "Good questions. Here are some numbers. The buildings around me are renting at $15-16 per sqf. My 800 \"or so\" sqf is @ $12.75 the building adjacent is @ $14.72 sqf. So they are at market rate. \n\nThe building under an 8% Cap rate is valued at $129,750. 6% Cap rate is valued at $173,000. \n\nIt makes more sense if I purchase the building. I am expecting my rent to increase with a different owner and ultimate fear if I getting kicked out as my lease expires Aug 2018\n\n", "replies": [{"id": "dnll8ws", "text": "So gross rent is $16,679 and you calculated NOI at $3,600? That's an 80% expense ratio. Where is all that money going? Let's say hypothetically you pay $173,000 for it, 30% down ($51,900) plus ~1% closing costs ($1,730) you'll come out of pocket $53,630 not counting any reserves the lender requires. Then if your mortgage is at 5% for 20 years your mortgage payment would be $799 a month plus tax and insurance. You're paying $531 a month now. That's a lot of cash and a big jump monthly. Can you handle that? If your main concern is getting kicked out or having your rent pushed up can you not just ask the landlord to renew your lease now? It should help him get the property sold. Win win.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dnf45cm", "text": "Why don't you use a good commercial real estate broker? You don't pay them anything and they negotiate on your behalf. ", "replies": [{"id": "dnl32bo", "text": "I have a Commercial Real Estate Broker. He's interested in my numbers for my business which I am still in the process of proving. If they don't make anything from me, then how are they getting paid?", "replies": [], "depth": 2}], "depth": 1}]