Closed on my first commercial mixed use property !
Investment Info:
Large multi-family (5+ units) commercial investment investment in Syracuse.
Finally after several months I closed on my first commercial deal. A mixed use multifamily. There are two buildings on one tax map. The main building has a corner store/bodega on the first floor and two rental apartments upstairs. The second building has two more rental apartments. So a total of four units and one store. Purchase price $125,000, cash invested $37,250. Gross monthly rents $3150 . Net cash flow $1100 . Cash on Cash 35 %
What made you interested in investing in this type of deal?
I was eager to move to a larger multi unit after only investing in single family properties ( which by the way I love) but this deal came up that my broker had just listed and the price was right in line with what I was looking to buy. I had sold a single family in Texas and was looking to reinvest to a higher cash flowing asset and also gain some experience with commercial property acquisition on a small scale. ( I did not do a 1031 exchange as I needed to use half of the proceeds personally )
How did you find this deal and how did you negotiate it?
My broker had just listed the property and I jumped on it right away, I was able to get an offer in within a couple of days and luckily because the the day my offer was accepted multiple offers came flooding in. It's a C class building in a developing area. Needs some updating, rents are below market ( but it still cash flows great anyway) . Needs a couple small plumbing jobs. We negotiated with the seller to deliver a new C of C which is now good for 5 years.
How did you finance this deal?
I used a local commercial lender. 25% down through my LLC with a personal guarantee. Its a 5 year fixed rate of 4.75% with 5 year adjustments on a 20 year amortization schedule. I was surprised with how easy the underwriting process was and how quickly I received commitment. I had previously used conventional bank loans in my personal name and a seller finance deal so this was my first commercial application.
How did you add value to the deal?
The property is currently fully occupied with the store tenant on a lease through mid 2021. We are going to raise the rent on the store as it is below market for the size and area and hasn't been raised for some time. I plan to slowly renovate/update the 4 rental units but not until they become vacant so not to disturb my tenants for now.
Lessons learned? Challenges?
I had some trouble with insurance, as there were two buildings on one parcel we had to make sure both buildings ( and they have separate addresses ) were covered. Finding good coverage at a reasonable price and for mixed use property wasn't easy compared with singles or small residential multifamily.
Also closing dragged on and on and my loan commitment almost expired! It was through no fault on our side just dealing with out of state attorney/seller and waiting on paperwork from their end.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
I used my broker Frank at Procopio Real Estate. Funding through The Upstate Bank.