I am looking at buying an old two story brick commercial building that is right on the town common in a very good city just west of Boston, and is perfect for mixed use. Price $750K, and most of the repairs would be cosmetic. It has the location, and the space to fit TWO restaurants on the retail street level, ample sidewalk space for outside dining, and plenty of deeded parking. Upstairs is a blank canvas, with over 8,000 sq ft of raw space that would be perfect as condos or apartments. Spoke to the town, and they are very much behind a mixed use approach to redevelopment in this space. They have been waiting years for someone to take on the project, and have assured me that they would be behind me if I buy it. (including the town planner etc) Quick analysis of the sq. footage shows I can get about $180K / year in NNN lease income if both sides of the first floor are leased, so I can more than cover the debt service. And I thought I could build out the second floor in year two, after I had a solid year of income.
The question is, where do I start? Do I talk to potential tenants first, or the bank? Would the bank want to see signed leases before they will consider a commercial loan?
And, If I hire a commercial broker to represent me and help me to pull it all together, do I pay him (her) or does the seller?
Thanks for any input, and I'll keep digging through the threads for more info as well.
What you are proposing is an incredible amount of work for a commercial broker for a low fee.
You get massive upside but the broker doesn't in this case. I would think a local commercial broker who does more mom and pop stuff would take this on and also along with the sale hope for some residual income.
If the property isn't listed by a brokerage then you would ask the seller to pay for the buyer brokerages commission in the purchase and sale agreement. I usually put it in the LOI which the commission part is binding on the seller with the purchase and sale agreement that is eventually negotiated between the attorneys. Just remember believe NOTHING and I mean NOTHING that a city employee or representative tells you unless it is in WRITING where you have legal recourse if things happen down the line. I can't tell you how many times I have seen counties and cities say one thing and make false promises verbally and then back out or say they never said it or they were misunderstood etc.
When you stand in front of a judge and you have a signed document from the county or city that is where the rubber meets the road. The rest is here say and while verbal agreements in many courts are proven legal that are generally held to be unenforceable ( your word against theirs ).
Tim I am not saying you wouldn't compensate a broker accordingly I am just saying doing this job versus a larger commercial broker selling off a 5 million Walgreens for example is more income producing use of time.
That is why I said a local mom and pop type commercial broker in town would probably love this type of business.
@Joel Owens Thanks. Makes sense.
@Tim Walls PowerBall drawing tonight at 10:59PM $80,000,000. Jackpot!
As Joel suggested this is a very Big deal, very risky and maybe the highest return for you if successful. I'd look at "lower hanging fruit"...
But, if you're going ahead, 1. Get it under agreement with the Seller. 2. Comps. 3. Financing.
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