Northwest, IN · Member since 2012 · 12 posts · 0 votes
We are considering a commercial property purchase to hold & use for expansion of our business. There are currently (3) buildings … a large warehouse, a 4 bay service shop and a small office building on the 4 acre county lot. The asking price seems fair to market.
My biggest concern ... It’s next door to an auto salvage lot that’s been around for 15+ years.
Attorney is placing a Phase 1 ESA approval contingency into our offer.
Let’s speculate for a moment that the property passes either Phase 1 or Phase 2 ESA and we purchase. 15-20 years down the road we're ready to sell. Maybe the property passes current standards but what if it doesn’t … I could have an essentially worthless property.
Please share any thoughts on this subject. Thanks in advance.
What's drawing you to that property specifically.....why that one?
- Proximity to our main (and public) location ... 10 mins drive away - Affordability - Existing Improvements & Layout (structures w/ concrete flooring, electric, water well, laydown yard, barbed wire fencing) - Semi-Private location (this will not be a business site where our customers will visit)
It's tough for me to get over the environmental concerns of the Junkyard next door. The junkyard shrunk in size over the past 20 years to the point where there were only a couple of scrap autos there in 2019. It was purchased in 2020 ... (6.3 acres for $21K + $24K in unpaid property taxes) and there are now approx 100 scrap autos on the property.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
3y
This is a great question, I'm looking forward to hearing responses from others with more experience here. But my 2 cents is that this shouldn't be looked at as a real estate investment. It's more an investment in your business. If purchasing this property will allow you to increase revenue by XX% over the course of the next 15-20 years and add $XXX,XXX to your bottom line, then that should be the determining factor.
Just throwing out random numbers as an example: If the property costs $500,000 but buying the property single handedly will allow you to expand your operation and generate an additional $2,500,000 over 15 years, then the purchase probably makes sense.
Real Estate Agent · Puyallup, WA · Member since 2022 · 551 posts · 378 votes
3y
You have no idea what the surroundings of ANY property will be like in 15-20 years. As investors it is a speculated guess as to where we see the value going. How loud is it next the junk yard? The junk yard will negatively affect the value of the property during the sale (if the junkyard is still around then) but it will also affect the value on the purchase so you should be able to get into this property cheaper than others in the neighborhood.
Also, think about cash flow, is the junkyard near by going to drop your rental income enough to make passing on this deal worth it or not?