Is this property worth 500k?

Question

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

Jeffrey K. · Answer

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.

Michael P. · Answer

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.

Chris L. · Answer

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

Scott R. · Answer

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

Doug P. · Answer

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".

Chris L. · Answer

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

Doug P. · Answer

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.

Chris L. · Answer

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

Is this property worth 500k?

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