fill up Low occupancy property

Rental Property Investor · los angeles · Member since 2019 · 12 posts · 1 vote

I’ve been searching for properties to invest in and like many, I have come across low occupancy rates. Wether it would be in retail or an apartment, the proforma (100% occupancy) would yield amazing cash flow and especially in retail, would sell for substantially more than purchased (once filled). Does anyone specialize in filling vacant commercial properties and has any strategies you can share to an aspiring commercial ”flipper”.

Thanks, Ben

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Don KonipolBusiness Member

Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes

@Ben Haridim

In many areas retail is way overbuilt. Many retail centers need substantial upgrades to attract tenants and in many cases the obtainable rental income doesn’t justify the investment.

The main reason for obsolescence of retail properties are

1. Continuing increase in online sales especially with Amazon Prime next day delivery

2. Continuing shift from independent retailers to big box stores

3. Move toward shoppers desiring a walkable “experience” rather than a traditional strip center

As a result many retail properties can not be rented at a economically viable rental rate. These properties should sell for land value less demolition cost. And in all likelihood will sit on the market unsold until that price is agreed to by the seller.

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Greg Dickerson
Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
7y
Could be poor management issues but most often It’s all about location and price. The better the location the higher the price. Less desirable locations need to offer free rent, TI money etc.
If it’s vacant there’s a reason so you need to understand that reason and mitigate it.
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OP
Rental Property Investor · los angeles · Member since 2019 · 12 posts · 1 vote
7y
@Greg Dickerson thanks for the help. what do you mean by “free rent and “TI money”.
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Greg Dickerson
Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
7y
TI is tenant improvement money for renovation and or build out of the space.
Free rent is usually given for a period of time to allow tenant to do renovations move in and get open. Can be anywhere from 30 days to 12 months. Also called rent abatement.
You can also try to land an anchor tenant by offering huge incentives as they will attract traffic and other users. Anchor would be like a Starbucks for a strip center, movie theatre for a larger center and other Marquee restaurants and retailers that are popular in your area.
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Bill Tracy
Member since 2018 · 5 posts · 1 vote
7y
I like to offer TI instead of rent abatement typically because it improves the building, while abatement just reduces your income. Typically, location is the largest hurdle, but can occasionally find the good location with the one easily corrected ugly building amongst the sea of otherwise good buildings.
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Ellie Perlman
Multifamily investor · Boston, MA · Member since 2017 · 281 posts · 521 votes
7y
At this stage in the cycle, I'd stick with high occupancy properties. I am conservative investor and like to take chances when the timing is right.
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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
7y
@Ben Haridim
In many areas retail is way overbuilt. Many retail centers need substantial upgrades to attract tenants and in many cases the obtainable rental income doesn’t justify the investment.
The main reason for obsolescence of retail properties are
1. Continuing increase in online sales especially with Amazon Prime next day delivery
2. Continuing shift from independent retailers to big box stores
3. Move toward shoppers desiring a walkable “experience” rather than a traditional strip center
As a result many retail properties can not be rented at a economically viable rental rate. These properties should sell for land value less demolition cost. And in all likelihood will sit on the market unsold until that price is agreed to by the seller.
Private Mortgage Financing Partners, LLC
Website View Page
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
7y
Don I have stayed busy around the clock with investors buying retail properties. The key is to have an extensive network to find the DIAMONDS to purchase. Lot's of overpriced dogs out there. Sellers are culling the crap out of their portfolio and trying to sell junk to unseasoned 1031 buyers who do not know how to properly evaluate what they are buying.
There are still plenty of deals out there but lots of buyers going for them so those properties last less than a week and under contract typically. I tell my exclusive clients we have to be ready to place an offer within a few days or possibly miss out when something good comes to market.
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