Garage Condo, good or bad idea?

Question

Looking at the overpriced housing market and the work involved on some of the projects, I decided against them so I have been dealing with things that are mostly handsoff (crowdfunding, etc).  Still, I really want to have some hard asset.  The housing market has soften here, but it is still more than what I would like.  Therefore I am looking at everything.  One of the thing that popped up are those garage condos.  I understand they will never have appreciation powers like a rental property, but they are relatively inexpensive and they will retain their value.  What do you think about them?  While I could get a SBA loan to run my small business, but it would be extremely difficult since my business doesn't require an entire storage space.  I can either keep it for myself to run my business or have lease it out like a NNN lease.  It will be difficult, but doable.  What do you guys think?  Also if I go with an unit that is empty, is it even possible to get a conventional commercial mortgage?   I can put a lot down, but I prefer not to stretch myself too thin.

Pat L. · Answer

We see a LOT of them being built around us on old vacant ag land but on accessible highways. Our commercial is always rented & yet driving to our properties in Canada the QEW is packed with them & they are all full if not sold & rented before being built.

I would build a complex before I'd buy into one just to NNN to another party.

Josh Ridpath · Answer

It is possible to get a conventional commercial mortgage. I've appraised industrial condos for banks. In terms of renting it out, you should read the condo documents carefully. In some cases, you are prohibited from doing so. What type of complex is it? Is it a place where business is actually being conducted or is it what is known as toy storage? If it's the latter, you will have a hard time renting the unit out. These complexes are more like country clubs among members and are typically shared by car enthusiasts and are more like man cave condos. People who can afford toy storage aren't going to rent. They buy. It's also important to understand the condo association budget to see if the reserve accounts are properly capitalized. In terms of the amount spent on maintenance, common area utilities, etc., it should match what you would expect to pay if you were underwriting The Who complex as a multi-tenant industrial property.