Buying a commercial property for 1st time and need advice

4 Replies

Im just looking for some general advice when buying my first commercial property. I plan on using it for my own business but really would like to have multiple outs for the day I dont need it by having something that I can sell or rent without doing something today that will make that harder to do.

There is a decent looking strip center within 3 miles of me. 24 or so total units with 16 or so rented or owned by the tenant. It seems to me like most are owner occupied. Its not in best spot and I wouldn't consider it good for walking traffic but looks pretty good. It was built in 2006 or so time frame so it didnt go so well for developer. Back then people were spending 170-200 sq/ft for 1500 sq feet but only a few sold. All the units are bare, concrete floors, no ac or electric inside... I flipped residential so its not scary.

6 are for sale now, 3 from original owner and 3 from some subsequent owner. They are selling at 51/sq ft (asking a little bit more) for 1500 or so square feet. But that is 4 sales over last 18 months. The one im looking at has been on market for 300+ days like most of them.

I can buy either a 1500 sq ft inline store front for about 43/ft or one with a slightly better entrance for same price/ft but its 1850 sq ft. I only need like 1000 sq ft really but am wondering about down road what makes sense.

Stat summary

selling for 51/ft

asking 43/ft

days on market = 300+ days

Rent rate = 10/12 sq ft but doesn't seem like ton of demand.

condo fee = 1.55 sq/ft

taxes = 1.29/ft

My assumptions:

Build out 11-14/sq ft

Questions I was wondering?

1. I just think this spot isnt as rent-able, why wouldn't some other investor who seem to be happy with 10% cap take this? Doesnt that mean that these dont rent well and are mostly for owner occupants?

2. Would it scare you if most people tenants are owner occupants?

3. Whats the safest way to build something like this out. I dont need to do it any particular way for my business but would want to make it as rent-able as possible? What to stay away from. I was going to put down some laminate flooring and frame in a couple offices and a bath and have an open plan but who knows if thats stupid or not. Maybe Ill be there for 10 years but would like to have some options. Whats the smartest way to build out?

4. One is like an inline flat front store with glass front, The larger one has more curb appeal, its not an anchor but it just has columns on entrance and you just looks nicer.... should i even be thinking about that?

5. Am I missing something?

Thanks for any and all help. 

Why not get an SBA loan and buy a whole center as long as you occupy about 50% or more of the space??

Retail condo's like that are tougher like you mention. There is a strip center down the road from me but a retail condo or I would buy the whole thing. Some investor spaces leased out to businesses and some owner occupants.

Watch out on your property taxes that they do not go way up. If you have a shell interior costs are about  15 to 50 a foot depending on a mom and pop or a high end national tenant. Exterior is about 100 foot to build so buying for 43 a foot is below build able ground up cost.  

Thank you... good advice.   I couldn't get to 50% on this one but that is an idea.  If you know any good brokers for this type SBA, id appreciate knowing. 

I wonder how much more than your loan payment one should expect to make on a reasonable deal?

So by "retail condo" you mean like small restaurants, all-state insurance offices type places?  What else is there other than that?

again thanks 

A retail condo for example a strip center where the individual stores are sold rather than leased. Another example would be like industrial garages where it's one big building with 10 work spaces for contractors or whatever and they each own their own unit and contribute to common area maintenance (condo fee), or that might be considered an industrial or commercial condo. Basically condo just indicates that the building is split into different ownable units as opposed to all being owned by a single owner and leased to various people/businesses.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.