Persistence and low balling, does pay off.
This a tale of a property I closed one year ago to the day, April 4, 2013. Arguably one of the most difficult properties I've ever acquired.
Property: 4600 sqft commercial building, clay tile construction w/ solid beams. Beautiful (exterior) 1930s ageless appeal, huge windows in the show room. Great light. Previous use: Ford Dealership w/ Gas Station circa 1940s, Ford Service center 1950-60s, then Honda Dealership 70s, and then finally a waterbed store and various antique stores more recently..
Bad: Inside - horrible. Just crap in every way imaginable. People had hacked their business into this building for 50 years. Really bad: Buried underground storage tanks. Below ground hydraulic vehicle lift sump that was leaking. Paint falling off the walls. Exterior wall that wasn't stuccoed required significant repair. Boilers needed to be decommissioned and gutted. Bad roof, etc.
Listed at $300k. Offered: $200k. Initial offer rejected. Seller accepted an offer at $260k is what I heard (no verification though).
Under 2 months goes by, and buyer can't secure financing due to EPA issues with building related to underground tanks and hydraulic sump. Bank is requiring a stage 1 cleanup. Property is re-offered to me at $200k AS-IS. I refuse and offer $160k. Seller refuses and I figured OK, end of deal ... or so I thought.
I forget about the building all together. 6 months later, realtor calls me and tells me property is back on the market, all underground tanks had been removed, and stage 2 cleanup and had been performed and signed off. There was offers on the building AGAIN already, and wanted to know if I wanted to offer. I told them I would offer $150k. Realtor puts in the offer, immediately rejected. Seller accepts a much higher offer. (It was owned by a trust and they were a serious pain in the butt).
~10-15 Days goes by - maybe if that. Yep, wouldn't you know it - banks still wont finance it. I guess the local credit unions dont want anything to do with a stage 2 clean up building. Buyer gave up, and it was re-offered to me. I walked through the building, noting what a terrible job decommissioning the tanks they did and just massacring the floor to get the hydraulic sump out. I put in an offer of $130k, $75k cash, 30 day close, owner carry a note of 55k for 2 years at 6%. About a week later, the seller accepted, we closed April 4 2013.
We are currently at month 8 of remodel. It will soon open up as a 50s themed restaurant with a full remodel, structural upgrades, and a laundry list of upgrades. I already have a tenant signed and waiting for construction to complete. We are charging a base rent of $1/sqft per month. We increased the square footage to 5420 square foot with an upper level addition as well. The opening of the business should coincide with the paying off of the mortgage note. It was structured as note & trust deed.
Total costs to date:
$130,000 purchase price. $1500 closing cost.
~$27,000 in direct labor (employees)
~$14,000 in materials
$8200 structural engineering & architectural fees
We are about 75% percent finished with the remodel at this point.
Happy hunting.