Trade Market Rentals?

Question

Has anyone ever rented a property to individual trade market booths (i.e. crafts, boutique shops, etc)? I have a small office building in a rural area outside of the DFW area that I can't sell and I can't get another tenant in. However, the building is next door to a large trade mart that is open only on the weekends and draws a big crowd. My parents have been using the building between tenants to sell re-sale antiques (free rent of course, but saves me from having to have vacant property insurance). Several of their customers have come in and asked if I would rent individual spaces so they can sell their goods.

I have calculated that renting each office to individuals on a monthly, or even weekly (setup, take down) basis, will make a lot more $$$ than I was making with my last tenant.

Has anyone ever done this? Are there any special rules or guidelines? I know that each individual booth needs to provide proof of a state issued re-sale certificate, but what else?

I have calculated that renting each office to individuals on a monthly, or even weekly (setup, take down) basis, will make a lot more $$$ than I was making with my last tenant.

Has anyone ever done this?  Are there any special rules or guidelines?  I know that each individual booth needs to provide proof of a state issued re-sale certificate, but what else?

Micki M. · Answer

@Kim H. Just as a point of clarification, what we were doing was sort of the anti- "executive suite". We were definitely not a Regis or corporate solution with all the bells and whistles.  We were a very cool space and had everything in terms of tenants from painters, photographers, cleaning service, community groups, etc.  Pop up shops and shows were also a quick and easy way to make money.  Take a look here if you like https://www.facebook.com/TheNewWazeeUnion

Micki M. · Answer

I think that's a creative solution to get cash in your pocket in the short term while you figure out a long term strategy.  My old commercial firm specialized in taking underutilized industrial space and partitioning it into "micro-offices". We had 90% vacancy while a lot of commercial space was sitting empty for months because the city was full of self-employed and startup businesses that couldn't afford 1000sf plus NNN's on a 3-5year lease, but could afford $150-250/mo all inclusive rent with short term leases.  Creative businesses and artists love space like that and really appreciate landlords who work with them.

Kim H. · Answer

Micki M. I have given the "executive suite" concept some thought as well.  However, I think I would need to add internet to my expenses.  And, with it being a rural, small town, I am not sure what the demand would be.  But I will figure something out.  Hoping to give it a month or two with my big "owner financing available" sign out front and see what happens.

Andy Robison · Answer

Why not pay your parents to monitor everything and keep everything on track? 20% or more of net profits and boom! Someone to monitor your buisness for you while you are free to make more deals.

Kim H. · Answer

@Carlos Flores I've already been approached by Big Daddy's (the market next door) and he wants to pay me $70k for the building because he wants to tear it down and add more parking.  I paid $100k and added $30k in renovations back in 2008, so I'm not selling for $70k.  It's currently listed at $113k, which is already a loss, unless I count the rental income I've made through the last 3 years.

I think the only way I could get him to buy it or lease it would be to compete with him.  Maybe I should name it Little Mamma's.  LOL!

Carlos Flores · Answer

How about leasing it to the guy that runs the trade mart since he is already in that business?

Mike H. · Answer

Thats just it. Its not crazy if its cash flowing. :-)

Here's the other thing, maybe once you do this for 6 months or so, you can then reposition the building for sale as a market space with stronger income numbers and might have an easier time moving it once you can prove the model makes more money that way.

You might even be able to sell it to the market operator next door. They might want to pay (or even overpay) to keep their monopoly on space for that weekly market.

Kim H. · Answer

But I need to make money or cut bait on that property.  So, my choices are limited.

Kim H. · Answer

@Mike H. No, mom and dad make sure no idiots tear the place up and oversee tenants when necessary. Plus, my dad has done a LOT of work on my investment properties through the years and only takes $10 per hour for labor.  They have earned their free rent.

Yes, utilities average around $300 per month.  Less when my mom and dad are in there because they really watch it for me and read the meter daily.

Our summer heat gets over 100 some days, so I could see a huge benefit to an indoor space.  I think my spaces are slightly smaller though, so that might compensate for an equal price.

I just don't know if I want to be in another kind of business.  I already have my real estate brokerage, my rental properties, a new multi family that I am closing on in a month, and now a trade market?  Seems a little too diversified (or crazy).

Mike H. · Answer

Didn't think about the utilities. So they would go from the tenant's responsibility to yours. 2,000 sq ft building would run, what? $300 a month for electric, gas, water and trash?

Also, if the outdoor guy is charging $200 a booth, is there any chance that you could get $250 or $300 a month for an indoor space?  It might be worth $25 a weekend more for those vendors to be inside out of the elements. I realize there's no snow in texas but still. The heat is a killer down there isn't it?

It'd be worth it to me to pay $25 per weekend more to get inside.

Maybe you could get some vending going on in there too and add some more income for yourself that way too. Foot traffic may be a negative in some ways, but it may offer some additional opportunities for you too.

Vending may help even steven you on the utilities.

The one question I do have is - are you going to start charging mom and dad now? :-)