Experience in Paying List Price on Recent NC Commercial Property

[Artie Kamiya]

I'm in the process of identifying a few North Carolina commercial properties in the $700,000 - $1,200,000 price range. In general, what has been your experience in order to get the winning bid? 10% over list? 15% over list?  Just wondering since I'm using a 1031 exchange in the coming months. Many thanks!

[Don-Carlos Moniz]

Artie,

List price should be a secondary consideration (or lower).  Run your numbers and make your offer based on that underwriting.  Buying the wrong property can cost you more than the tax hit.

Most commercial properties with a list price are either priced at or over value - with the latter being more common.

If you are way off the list price, you may want to move on to the next property.  It may be that the seller has unreasonable expectations of the property's value.

Good luck, and if you have any questions, don't hesitate to ask.

Don

[Ronald Rohde]

When did you complete your downleg? Is it under contract? 

As noted, you need your own underwriting and submit as many LOIs as you can, don't automatically assume 15% over list...

[Maria Cox]

Ditto the last two comments. Always run the numbers and make sure it makes sense for your investing strategy! Are you looking for more turnkey or value add to refi out, etc...

[Jade S.]

Another question...exactly what KIND of commercial property type are you seeking? More of a STNL type NNN investment, or a 5-6 tenant retail storefront situation? Or a multi-family asset? So many flavors to consider. And as others have stated, do the proper analytics to derive your potential offer numbers.

[Mark H. Porter]

You’re looking at this as a homebuyer, not an investor.  Net cash flow is what pays the bills and has been my hallmark for 25 years.

NOI minus capex set aside minus debt service - this is what sets the standard

[Artie Kamiya]

[Mark H. Porter]

Artie - I just closed my 1031 by purchasing a strip mall in Raleigh last week.  Solid cap rate due to it not being in the most desirable area of town.

As I mentioned almost a year ago, to me, it’s all about the before-tax-cash-flow.  I know and understand the ratios people like to use, but that positive cash flow is a risk moderator as it allows you to handle the unexpected capex with ease.  Good luck on your purchase.

Set yourself the goal of having all three of your 1031targets close to a PSA before closing on your downleg.  45-days goes by FAST when you have to get due diligence done prior to making a decision.

You already have your QI identification in order?