Is this property worth 500k?

It is a commercial property located in south florida. On it there is a convenience store, one large warehouse with office space in front, and 5 small apartments they are kind of like little villas because they are are little free standing houses. heres the rent break down.

apartments = $600 each = $3000
Warehouse = $2,000 but is vacant at the moment.
Store = $3500 with lease

How much would you say this is worth? Property taxes are 10k.

Thanks,

Doug

Edited: 06/26/2010 at 10:35AM

Jeffrey K.

Real Estate Investor · Milwaukee, Wisconsin

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Icon_minipost Nov 19 '09, 06:47 AM

It depends on the shape it is in. It might be worth 500k. Is it listed for that or is that what you have it under contract for? Are you sure your numbers are right?

Edited: 06/26/2010 at 10:35AM

Chris L.

Rehabber · Fort Wayne, Indiana

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Icon_minipost Nov 19 '09, 06:52 AM

Doug,
What are the other expenses?
Who pays the utilities?
What are the common area mx expenses?
What is the deferred mx on the buildings?
What is the chance of getting a tenant for the warehouse?
How is the store business doing? Are they solid or about to go out of business?
What is the status of the tenants? Are they current and wanting to stay?

These are some of the questions that I would want to know before I went any further.

Good luck
Chris

Edited: 06/26/2010 at 10:35AM

Doug P.

· Florida

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Icon_minipost Nov 19 '09, 07:09 AM

Thanks for the replies,

What what does MX mean?

The tenants in the store are very happy and have 3 years left on lease and they want to re lease. They cash checks aswell and seem to do very well for themselves. the property is located in the middle of a big neighborhood so they are always busy.

Currently the owner pays utilities for the apartments but not for the store or warehouse, this is because they are all on one meter.

Right almost all the apartments are vacant but in good shape ready to rent.

Overall the property is in good shape and needs very little repair.

they had a deal under contract but back out for 750k two years ago because they decided to keep it.

what do you think?

Edited: 06/26/2010 at 10:35AM

Chris L.

Rehabber · Fort Wayne, Indiana

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Icon_minipost Nov 19 '09, 07:17 AM

Doug,
MX is short for maintenance.

Do you know what the annual utilities cost?

What are the insurance costs per year?

If all of the numbers are accurate and there is not a lot of deferred maintenance, this could be a good deal for you.

Chris

Edited: 06/26/2010 at 10:35AM

Doug P.

· Florida

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Icon_minipost Nov 19 '09, 07:21 AM

Maintenance on for the common areas is very minimal, there is just a small amount of grass.

I am told insurance is close to 10k per year, but I am getting my own quotes right now.

Also the buildings all have brand new roofs put on last year.

and to give an idea of the ware house size its around 4000sq ft including the offices.

Edited: 06/26/2010 at 10:35AM

Chris L.

Rehabber · Fort Wayne, Indiana

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Icon_minipost Nov 19 '09, 07:30 AM

Doug,
This has the potential to be a solid investment for you. With that said, I am not familiar with your area and I don't want you to make your first deal on my quick review of your numbers.

Do you attend a local REI group?

I would recommend that you run the numbers by someone at the local level so I don't mislead you in any way.

Keep digging and good luck.

Chris

Edited: 06/26/2010 at 10:35AM

Doug P.

· Florida

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Icon_minipost Nov 19 '09, 07:44 AM

Thanks a lot, but no I'm not a member of any REI group what would be my second best way to get an accurate appraisal?

Edited: 06/26/2010 at 10:35AM

Chris L.

Rehabber · Fort Wayne, Indiana

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Icon_minipost Nov 19 '09, 08:16 AM

Doug,
Do you have financing or funds lined up?
When you know what your monthly payment will be you can add your other costs as well.
Your financing will run between 3K-4K per month depending on rate and length of the loan.
Taxes: 1K
Insur: 1K
(I always like to estimate high)
Utilities?
Miscellaneous MX costs.
I would anticipate your fixed costs to run between 6K-7K per month. I might be high but would rather plan for the worst case.
Right now it sounds like you have a solid tenant in the store. When you get the warehouse rented, you would about cover your fixed costs and your profit margin will depend upon your apartment rentals.

This is a lot to take on for your first deal. You step into managing apartments and take on a pretty good debt load right away.

I don't want to dampen your enthusiasm.

This has the potential to be a solid deal.

Good Luck
Chris

Edited: 06/26/2010 at 10:35AM

Jeffrey K.

Real Estate Investor · Milwaukee, Wisconsin

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Icon_minipost Nov 19 '09, 08:29 AM

Get a bid to see how much it would be to individually meter the units. I dont like the fact that you pay everything. Price seems high to me. See if you can get it near 400k. I dont like the fact that you also have all these units that need to be rented. Do you have reserves to wait to find a commercial/industrial tenant in a down market in addition to carrying the vacant residential stuff? I also dont like the idea of a check cashing place. That tends to bring the wrong crowd.

Edited: 06/26/2010 at 10:35AM

Doug P.

· Florida

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Icon_minipost Nov 19 '09, 08:44 AM

I have enough cash to be fine for a while w/o any tenants. So I'm not worried about that, I'm more worried about what the property is going to be worth fully rented.

Also your right about check cashing bringing the wrong crowd but the store is in a low income neighborhood in west palm beach florda, so its "normal".

Edited: 06/26/2010 at 10:35AM

Michael P.

Real Estate Investor · Dallas, Texas

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Icon_minipost Nov 19 '09, 09:08 AM

Originally posted by Doug Proctor

Also your right about check cashing bringing the wrong crowd but the store is in a low income neighborhood in west palm beach florda, so its "normal".

This may or may not be true. Tons of hispanics use cash checking places and my experience with them is they are pretty laid back and peaceful. Don't know about your area though maybe it is way different.

If I were you I would run two fake ads on Craigslist. One is for the warehouse and one for an apartment. See what kind of response you get. This "might" give you an indication how fast you can rent the places for and for how much. It is free and could provide valuable information.

Edited: 06/26/2010 at 10:35AM

Scott R.

Real Estate Investor · Amarillo, Texas

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Icon_minipost Nov 20 '09, 02:09 PM

Originally posted by Michael P.

Originally posted by Doug Proctor

Also your right about check cashing bringing the wrong crowd but the store is in a low income neighborhood in west palm beach florda, so its "normal".

This is why craigslist is basically useless in most areas, cause half if not more of the post are fake or people "testing" stuff.. I reply to several adds everyday in 3 different craigslist areas, almost never do they turn out to be legit. What a waste.
-Scott

This may or may not be true. Tons of hispanics use cash checking places and my experience with them is they are pretty laid back and peaceful. Don't know about your area though maybe it is way different.

If I were you I would run two fake ads on Craigslist. One is for the warehouse and one for an apartment. See what kind of response you get. This "might" give you an indication how fast you can rent the places for and for how much. It is free and could provide valuable information.

Edited: 06/26/2010 at 10:36AM

Scott R.

Real Estate Investor · Amarillo, Texas

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Icon_minipost Nov 20 '09, 02:39 PM

Sorry about above. I wrote in the middle of the quoted part! lol this what i wrote:
This is why craigslist is basically useless in most areas, cause half if not more of the post are fake or people "testing" stuff.. I reply to several adds everyday in 3 different craigslist areas, almost never do they turn out to be legit. What a waste.
-Scott

Edited: 06/26/2010 at 10:36AM

Jon Klaus

Real Estate Investor · Dallas, Texas

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Icon_minipost Nov 20 '09, 06:37 PM

Originally posted by Scott Ricenbaw

Sorry about above. I wrote in the middle of the quoted part! lol this what i wrote:
This is why craigslist is basically useless in most areas, cause half if not more of the post are fake or people "testing" stuff.. I reply to several adds everyday in 3 different craigslist areas, almost never do they turn out to be legit. What a waste.
-Scott

I use CL a lot myself, but I think it would be better if RE ads cost $5. Yes. I'd pay several hundred $$ a year, but I bet the ads would be more effective without all the competing junk ads.

Edited: 06/26/2010 at 10:36AM