(Former Strip Club) Accessing Viability of Commerical Real Estate

10 Replies

Hi everyone,

I'm considering (using the term very loosely) venturing into the commerical real estate market. I came across an abandoned brick building in downtown Louisville that's right across the street from our federal courthouse. 

Not knowing the history of the property, i thought it would make a great law firm or insurance agency. Later found out that the place used to be a strip club that got shut down in 2010 after a raid. 

Regardless, i think the place has potential. I sent a letter to the owner asking to walk through the property. 

This leads me to my question: how do you access the market for commercial real estate? Meaning, how can i determine who the property could be let to and at what price?

I've done this exercise with residential, but it seems altogether different with commerical. Any advice the community could offer would be much appreciated.

Felix

Can you start the rumor that there are still ghosts from the previous establishment, that are haunting the venue? Then you'd have to figure out what kind of business normally attracts single men, that don't want to be seen at a strip club ;-)

@Latravis Brazil I was there (Gene Snyder) today working in bankruptcy court. I usually park by the White Castle over there. I've seen the building before, but I actually stopped to look today. I'll have to stop by to introduce myself next time I'm there.

The fact that it used to be a strip club is IMO relatively irrelevant. What is relevant is that it has been vacant for 6 years now. To me this shows very little demand in the building and it would be nearly impossible to get financed.

@Felix Sharpe - I imagine the previous use could be a draw in the right circumstances...  Coming soon, T&A PLLC!  

You can look up the zoning on the PVA which will tell you what it can be used for.  Commercial is great due to low headaches and the ability to offload minor maintenance (or sometimes all maintenance) to the tenant, but that's only if you can get it rented.  does it have any parking?  I know that can be a challenge downtown.  

Best,

 - Chuck

The key to this project may be first, if there are any issues with the building. It may be the property has some issues which is why it has been vacant for so long Second, any property is viable for financing if you can acquire for the right price and secure a good tenant. 

I would start with speaking with the owner then making them disclose any potential issues they were aware of. Next I would try and negotiate a very favorable price with strong contingencies. Finally once under contract I would try and find a strong tenant that would commit to leasing the property.

Best of luck

Originally posted by @Felix Sharpe :

Hi everyone,

I'm considering (using the term very loosely) venturing into the commerical real estate market. I came across an abandoned brick building in downtown Louisville that's right across the street from our federal courthouse. 

Not knowing the history of the property, i thought it would make a great law firm or insurance agency. Later found out that the place used to be a strip club that got shut down in 2010 after a raid. 

Regardless, i think the place has potential. I sent a letter to the owner asking to walk through the property. 

This leads me to my question: how do you access the market for commercial real estate? Meaning, how can i determine who the property could be let to and at what price?

I've done this exercise with residential, but it seems altogether different with commerical. Any advice the community could offer would be much appreciated.

Felix

 Understand what is structural. For example, the steel posts are for structural support; the brass ones are not.

Having been a former strip club, at least the attorneys, judges and political leaders know the building.

You can find cap rates of competing space from commercial brokerages like CBRE. Loop et might give you some insight, too.

If this was constructed as a special or single purpose building as a bowling alley or theater might be, the seller has fewer choices among buyers or tenants. Same as a hotel/motel property owner must find managing operators or a franchisee.

Financing is always tricky in these properties. Get the longest term that you can afford. Seller financing is not only preferable, it might be the only type available (unless the SBA revives their SCFP - Strip Club Financing Program).