is this just a shiny object?

3 Replies

Hi Everyone,

Allow me to first start of by saying this is my very first post, and I am super excited to be here! (also hoping I a posting in the right section). I recently discovered BiggerPockets a few days ago, and since have been going on a frenzy listening to podcast and stalking the blogs. This is such a great community!

I am a brand new investor, and I recently came upon a deal (or shiny object, not sure yet) that I've been trying to wrap by head around. A family friend is relocating/retiring, and is offloading a lot of his properties. In speaking to him about his intentions he mentioned that he is tired of being a landlord, and that he has been at it too long. He is very interested in selling, and mentioned he would work with us to make it happen. That said, I am not sure if this is a good deal or not, and I would love to get some input from you guys.

Here is the deal:

Asking price: $2,300,000 (in talking to him we can come to a deal at $2M)

Mix use property (6/8 units already rented with 7 year leases on the long end, 1 unit has a 3 year lease left). All units located on the same lot (corner to corner) accross from the town's main shopping center, and a newly build Wawa.

-1 house

-1 Car detailing center

-1 Mix Martial Arts Studio

-1 Beauty Salon

-1 General Contractor

-2.5 Offices (2 offices not rented)

-1 large storage space (can be potentially turned into more offices or something else)

All units are triple net leases, and pay for the first $500 of any maintenance. Property was completely gutted and renovated within the last 5 years.

PGI: $193,800 (4% yearly increases built into all leases) yearly

NOI: $137,970 yearly

OPEX: $46,140 yearly

I included some excel calculations below that breaks all this out. Seller is willing to seller finance just over $1M leaving me to try and come up with the balance of the deal. Base on this information and the calculations below, would you consider this to be a good deal? My thoughts are that I would be able to add to the NOI by renting out the remaining office space, and potentially doing something with the storage space. Any advice/input would be greatly appreciated!

@Aneury Evangelista you need to look at the lease terms for tenants in all commercial deals. Any month to month leases are worth nothing. You want to look for at minimum 3-5 year leases. The Seller should be willing to hand over the leases before an offer is in place.

@Michael Henry thank you very much for your input, Henry. I do agree that month to month engagements are of no worth. Luckily for this engagement I have confirmed all leases are in place with the shortest being a 3 year lease, and the remaining leases being locked in for 5-7 years.