Possibly buying a mixed use property

4 Replies

I am considering making an offer on a mixed use property. It has 2 apartments renting for $450 a month each and 1 commercial tenant renting for $2400 a month. The commercial tenant is a chiropractor. If they leave then the property will lose $1200 a month assuming I take out a commercial loan for 80% Ltv. The lease ends June 1st and they have to notify by March 1st if they want to renew. Not sure what to do. If the chiropractor stays long term, it's a great investment. They leave, it's terrible. The location isn't great (not horrible either) and may be hard to find a new tenant.

Should I make a contingency of 100% occupancy? Closing would be in April. Can I speak to the chiropractor directly to learn of their situation and intentions? Because I want to know about their long term plans 3-5 years into the future.

Thank you.

Originally posted by @Frank Jennings :

I am considering making an offer on a mixed use property. It has 2 apartments renting for $450 a month each and 1 commercial tenant renting for $2400 a month. The commercial tenant is a chiropractor.  If they leave then the property will lose $1200 a month assuming I take out a commercial loan for 80% Ltv. The lease ends June 1st and they have to notify by March 1st if they want to renew. Not sure what to do. If the chiropractor stays long term, it's a great investment. They leave, it's terrible. The location isn't great (not horrible either) and may be hard to find a new tenant.

Should I make a contingency of 100% occupancy? Closing would be in April. Can I speak to the chiropractor directly to learn of their situation and intentions? Because I want to know about their long term plans 3-5 years into the future.

Thank you.

Yes you can write up the offer contingent upon the chiropractor renewing or anything you else want. Everything is negotiable. 

You can also ask to speak to the chiropractor directly and inspect the spaces as part of the due diligence prior to moving forward with the rest of the inspections.

I agree with Greg. Everything is negotiable. Have either your agent or yourself, contact every tenant that is involved and screening them accordingly. In the contract, specify the history of the tenants. For both the apartments and the Chiropractor.

If you are worried about the Chiropractor leaving, there is also the opportunity to see if there is "value add" for the lower portion of the building. What is the Office/Retail space being leased as? NNN, FS, MG? That can change the amount of income that is produced for this property.

And to help with finding a new tenant, look within a significant radius, and see what possible businesses that are lacking in the location you are inquiring about. Providing a space for a business that has a dominant footprint can allow a stable tenant.