There?s a business center in town currently for sale. Over the winter months the current owners had extensive interior renovations completed and major electrical upgrades. It?s about 12 000 square? with a main level and full basement. The mail level is currently fully occupied by 9 businesses ranging from an accountants office to career development services. It?s not the first time it?s been for sale and the current asking price is about 150% over the recent renovation experience. It makes me question why some of the community business oriented people aren?t jumping on it. If we thought it might be a sound investment we might consider it if it would stand on its own with enough leftover to leave plenty for future upgrades to keep it current. Other than asking to see the ongoing heating/electrical insurance & property tax expenses vs stated income what questions should we be asking? The basement is listed as being renovation ready for further potential tenants. Any advice positive or negative would be greatly appreciated thank you.
- Thread starter Philip d
- Start date
Traditional Farmer
Well-known Member
- Location
- Virginia
There are some reasons its not selling that more experienced people know about and may be right or wrong on, you can bet.Better have deep pockets to cover things that might come up.Could be a good investment but you need to research every aspect of the situation before you jump in like how is other commercial real estate doing in your area,does your area have a growing or shrinking economy,could you weather an economic down turn if you lost most of your renters,things like that.Old saying applies "Fools go where Wise Men fear to tread".
MarkB_MI
Well-known Member
- Location
- Motown USA
Ask to see the seller's tax return info on the property. That would be IRS Form 8825 for a partnership, LLC or subchapter S corporation. That way you can confirm if the cash flow they claim is legitimate or inflated. I'd ask for returns going back to when they did the renovations. If they balk, walk away.
I own rental property. I vote to skip the majority of commercial rental property. Only owning those with long term leases with tenants. An example would be many Post office building in rural America.
The one your talking about seems to be over valued right off the bat. Also if it was a "good" buy one of the current tenants would be looking at it to buy.
Do not take this wrong but I am pretty sure a recently former dairy farmer would be hard pressed to beat the local business people that are NOT buying this property. So do not trade your recently hard won freedom from the stress and work of the dairy farm for the stress of a commercial rental property.
Here is one reason I do not think commercial rental property is a good investment unless your using it yourself, you are very limited in your buyer pool if you need to sell. Owning a house or even a farm you have many possible buyers. The majority of the rental houses I have sold have been to current tenants. They save up a down payment while paying rent and then buy.
The one your talking about seems to be over valued right off the bat. Also if it was a "good" buy one of the current tenants would be looking at it to buy.
Do not take this wrong but I am pretty sure a recently former dairy farmer would be hard pressed to beat the local business people that are NOT buying this property. So do not trade your recently hard won freedom from the stress and work of the dairy farm for the stress of a commercial rental property.
Here is one reason I do not think commercial rental property is a good investment unless your using it yourself, you are very limited in your buyer pool if you need to sell. Owning a house or even a farm you have many possible buyers. The majority of the rental houses I have sold have been to current tenants. They save up a down payment while paying rent and then buy.
Just sold my commercial building as the economy is great right now and there will never be an easier time to sell at a maximum price. The economy cycles and recessions occur on a regular basis. The time to buy is when the economy is in the tank and they are trying to "give" it away. No fun to sit with an empty or even half empty building paying taxes, insurance and maintenance.
Traditional Farmer
Well-known Member
- Location
- Virginia
My cousin is married to a lawyer that has bought several commercial properties when the seller was in a 'distressed' position because of financial or legal problems.Like you said
smaller pool of buyers than other properties.
smaller pool of buyers than other properties.
Straw Boss
Well-known Member
A basement is a liability around here anymore. Too much rain and water in the basement, you just lost half your square footage plus expense of tearing out carpet and drywall just to have it happen again later. If there's a business down there, they won't stay long as they can't afford the interruptions
.
.
steve_in_mo
Well-known Member
GENERALLY (key word) it doesn't work to own a commercial property like that unless you will be using part of the property yourself. Financing costs will make all the difference in the world on whether or not it will work economically. If you
want to consider this for reasons of your own, have your accountant prepare what are called pro-forma financial statements.
You don't really need to know what the current owners' costs are, except or utilities. Taxes and insurance will change
when/if you buy the property.
This advice is guaranteed to be worth what it cost you.
want to consider this for reasons of your own, have your accountant prepare what are called pro-forma financial statements.
You don't really need to know what the current owners' costs are, except or utilities. Taxes and insurance will change
when/if you buy the property.
This advice is guaranteed to be worth what it cost you.
Commercial property has always had a softer market around here. I have first-hand knowledge, because I bought a residential house on the main street of town and converted it to an office. The zoning was "transitional commercial", meaning it could be a residence until someone converted it to commercial, then it was supposed to be commercial from then on. I had a hard time selling it, and my realtor friend estimates I lost about 25% of its value by being commercial rather than residential.
Then to top it all off, when I finally sold it to someone who said she was putting in a pet supply store, she just moved in and started living there. 4 years later I was a little disgusted because I took such a haircut on the price, and talked to the city. They said there was nothing they could do- no teeth to the zoning regulations. In other words, I could have ignored the zoning, sold it to someone to live in, and received a lot more money. Only problem, it would have had to be a For Sale by Owner deal, because the realtors have to follow the zoning laws under their ethics rules.
Then to top it all off, when I finally sold it to someone who said she was putting in a pet supply store, she just moved in and started living there. 4 years later I was a little disgusted because I took such a haircut on the price, and talked to the city. They said there was nothing they could do- no teeth to the zoning regulations. In other words, I could have ignored the zoning, sold it to someone to live in, and received a lot more money. Only problem, it would have had to be a For Sale by Owner deal, because the realtors have to follow the zoning laws under their ethics rules.
After a 15 year experience in having some rental property, the only rental I"d consider is a storage building setup. People have too much "stuff", and need a place for it. Issues of late or no payments are easier to handle, plus the bellyaching of minor issues. All they want is some secure space.
Bob Harvey
Well-known Member
Many moons ago my (now deceased) partner and I had 2 commercial buildings, and 3 rented houses. The houses were a nightmare. The commercial buildings panned out well (one in Whistler B.C.). When it came time to cash out, most of the profits from the commercial bldgs. went to repairing the houses. Yes there was a little left over, and we did 'just' OK on the sale of the houses. Lots of headaches over 5 years, and didn't get rich - as was the plan.
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