Office Building Subject2
Has any one completed a sub2 on a commercial property or office building? Can this be done? What are thefine points to look for or ask seller? I am in NY on Long Island. Seller is interested leaving out of country... let me know
It depends on the market.
I know someone that did quite well in Charleston, SC.
Can anyone out there provide any contact info of people that have done this type of retail before? The guy in charleston? or any city. Let me know and thanks.
John,
Are you looking to do this in DC or NorVa?
You need to talk to people local to the area that you are considering. That makes all of the difference.
I have a place in Danville, Va that works ok and a place in Denton, Md. that works ok. I would never compare that to the potential ups and downs that you will find in DC or Alexandria. You need info. locally. Realtors, Business owners, best=other owners of the rowhouses close by.
Seems like a big markup for eight months in a declining market, but the return looks decent and getting better every year.
Is the location high traffic and popular? In other words, is it likely that the tenant will renew the lease, or you will have no trouble finding a new tenant on the same terms?
If you want the property, do you want a higher cap rate? A 10% caprate makes the property value only $216K. Make the offer you want for the cap rate you need. Asking prices are only a starting point for negotiation.
NNN makes all maintenace a tenant responsibility. If this is the case, then your main concern is how much you will have to pay to finance the purchase and whether your NOI will exceed your debt service. At $240K purchase price, I suspect that your NOI is not large enough to cover your debt service and give you a comfortable cash flow..
Looks like a good deal. I dont like the 7 month mark-up. But if 2 or more units sold for over 230k...this year...then i would guess the appraisal is correct, and 240k is the FMV.
The 5-yr lease is very very appealing. Althought the NNN is really of little value in this deal (because i would expect very very little maintainance in yr 0 to 5 of a new home.
I say flip a coin
Are you saying that to make it an investment you should put less cash down and finance the rest, just as long as it cash flows a little or breaks even? In other words, letting the tenant build the equity by paying off the loan, instead of tying up all of your money.
Yeah, you do have reason for concern. With the current market conditions you could be stuck with a vacant building. It sounds like your question is one of 3 points...
1. when you say high foot traffic what do you mean... in commercial spacing as in all real estate it is location, location, location. If that supports businesses making money you will keep the place filled.
2. Building condition and use... Is the building to be used for something else with some simple upfitting or exterior adjustments? My concern would be; who else can use this space.
3. What other commercial properties are in that area? If it is near businesses that draw a variety of patrons to the area then it could allow you for long time crossovers... use it for other things in the future.
I hope this helps you.
Why would you get more rent on smaller square footage? What is the theory behind that? Is that always the case?
If you have reason to believe Smoothie King will fail, talk to the other two tenants about expansion into your space, shazam, stable, long-term tenant! Also, with all the small businesses that start (and fail...) every year, a small building could be good strategic play, notwithstanding possible turnover.
JohnMckee,
You reiterated my point! Yours is small, surrounded by larger spaces. Yours will be the cheapest space available in the area while you charge more per square foot!