Single Unit Property in Strip Mall?

Question

Hi everyone! I'm new to real estate investing and have been searching through LoopNet and other sites to see what sorts of things are out there, and stumbled across a commercial property for sale for $30k. The property is a single unit in a strip mall. I'm not interested in this property at this point -- I'm trying to wrap my head around why someone would sell a single strip mall unit rather than the strip mall as a whole. My instincts tell me to stay away from anything like this, despite what appears to be a low price point. How common is the sale of a single unit in a multi-unit strip mall? Am I correct to be wary of something like this? What experiences do you have with a property like this?

Thanks!

Paul Munly · Answer

Levi T. Exactly -- it could be the unit hosting the 'Okinawa' for example.  From what I can tell about the particular property I mentioned, I don't believe the owner is the business operator -- it explains the current lease, when it ends, etc.  I haven't done any of the necessary math, let alone due diligence, at this point to determine whether it would be a worthwhile investment, but if this type of situation isn't too uncommon, I'll do some digging and post some details if you're interested.

Jon Raccah · Answer

Paul,

Many developers dont like to hold assets and in certain markets it makes more sense to sell individual spaces because there arent many instituational type investors with interest in the given area.

Ill try to put it in simple terms. Essentially youd be buying a condo, conceptually its the same as buying a residential condo. Theres an association that you have to pay dues to for maintenance, certain convenant restrictions that may not allow certain uses, so it comes with its own set of challenges.

Id like to hear some more details if you wouldnt mind, but a quick and easy way to always do a quick analysis on a commercial property is ask for the cap rate. Then research other cap rates in the area (if available) and see if the pricing is inline with the market.

Hope this helps,

JR

Martin Z. · Answer

In a retail condo as you are describing, you'll most likely be involved in a "CC&R" that may have restrictions and association dues. Read all the documents carefully.

Levi T. · Answer

Nah, zero interest

Levi T. · Answer

Strip mall like below? Very common. Developers will build them new, and sell them off to mom and pop businesses. Don't see to many after market ones. Would it be a good investment rental, I have no idea.