Warehouse Next Door Long Term Positioning-Neg Cash Flow
Investment Info:
Large multi-family (5+ units) commercial investment investment in Kenedy.
3500 sf Warehouse purchased for long term hold positioning. This smaller warehouse is adjoining a larger warehouse. Since it was vacant, and the extra space would become valuable for storage and parking for the big warehouse next door, I tracked down the owner and was able to negotiate a very favorable seller finance deal. Though has only leased 1.5 yrs of the 3 yrs owned, it is worth the holding costs.
What made you interested in investing in this type of deal?
After acquiring a larger corner lot warehouse, I thought adding this smaller adjoining warehouse would be a good long term move. It provided more land space, storage, and parking.
How did you find this deal and how did you negotiate it?
This warehouse adjoins a larger warehouse I purchased. There was no signs on it, so I asked the neighbors around town who the owner was. Not long after, I was able to negotiate a seller finance deal. This smaller warehouse was, and still is (being worked on now) in rough shape. I showed the seller how much I was spending on the bigger warehouse next door and that I'd be strapped for cash for a while. He agreed to sell with no interest.
How did you finance this deal?
This was a seller finance deal for very low down payment and very low monthly payments. The seller was very generous in working with me on this deal...especially when he offered to sell straight payments, no interest. As I've mentioned in other posts, the properties I buy and the cash I put in are lower than you might expect.
How did you add value to the deal?
The only work performed after acquiring was cleaning out. It's been in sweep clean condition ever since. Though this warehouse is rough inside, it still serves a purpose for storage and parking.
What was the outcome?
I was able to include this warehouse along with the larger one for additional income. It provided the tenant with extra space, and parking. They were also able to utilize the utilities.
Lessons learned? Challenges?
This was early on in my investing career, but I got over the mental blocks by thinking outside the box. This warehouse was vacant, and I wanted to buy it, but didn't have the funds available. I asked around to find out who the owners were until I was in touch with them directly. The seller's generosity made this deal possible. But, it would have never happened if I didn't ask. Even though I didn't have the funds, I asked: How can I buy this? Will the seller Finance? Can we be creative?
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
There were no agents involved in this deal; however, there was invaluable help from the neighbors and locals who were kind enough to tell me about the warehouse, and put me in touch with the owners. Small town generosity is really quite special, and even though this property has been cash-flow negative for 2 out of 3 yrs, it is worth it to me long term to have along with the big one.
