All Forum Posts by: Bob Solak

Is the higher interest debt on other investment properties?  If so you could run the numbers on taking a loan on the zero-debt property to pay off the other.

I'm still unclear on the goals - you've brought a lot of other things into the equation (e.g. paying of high interest debt, STR as personal vacation home, stocks/dividends, etc.). If you are saying you need a large cash infusion for other things, then selling (or leveraging 75% of the value) is probably the way to go.

This particular commercial property value is going to be based primarily on the income it can generate (actual or projected) to the buyer. So long as you can keep it occupied and drive up your base rent over time, your property will appreciate and you will maintain (and increase) your equity.  Your cash flow will be as stable as your tenant, but if you can weather a few months of vacancy, I don't think you will have a problem filling the place should they vacate. 

By the way, I think $140 per square foot is pretty high.  Anything under $90 in this area usually doesn't pencil out for me as a cash-flow interested investor.  But I tend toward more Class C than B.   

Dan, we are in the Chicago area industrial sector, albeit in the flex, small-bay arena. Given your described building location and post, I am guessing you are single tenant (seems to be the majority in that Elk Grove, Bensenville area). Personally, we prefer multi-tenant, to minimize vacancy risk. But in any case, I would NOT sell a industrial property for STR or multi family. The level of hassle/management is way higher than a good industrial tenant. Industrial vacancy rates for your size building are ridiculously low. If it was dividable into smaller units it would be even easier to fill.

Since you have no debt, you can weather a period of vacancy pretty easily.  

To give better advice, we would need to know what your overall goals and situation are.  If it were us, we would keep the property and take out loans against it for investing in additional industrial property.  That will, portfolio-wide, minimize your perceived tenant flight risk, and over time you'll get to an even better cash flow spot.   But it will depend upon how much you really need that $140k in cash flow right now.   

As for improvements, that is really tenant-dependent. For your sake I would make sure, if you aren't NNN right now, that you at least have RE taxes protection in your lease. I'm assuming you are in DuPage, which is better than Cook, but the long term isn't pretty RE tax wise anywhere in northeast IL.

It's atypical to find a building any more that is ALL knob and tube.   You will need to re-wire any of that.  Even if there is newer wiring in parts, it may be advisable to re-do all of it.  Get an electrician to have a look and a quote.  But I suspect you should assume you'll be re-wiring the whole thing. 

When our tenants want to leave early, we tell them that we will start marketing the space and trying to fill it but they'll be on the hook until we fill it, at which time we will agree to break the lease.   

Assuming they're refusing to pay, pore over every detail of your lease and proceed with exactly the processes called out by it (and get advice from your lawyer concerning State laws/procedures to follow in case they may trump your lease terms).  Be sure that the entire timeline is documented.   If your lease calls for official notices by registered mail, then send things registered mail.  You can email too but be sure to also follow whatever your lease says.  In the interim, be sure to hit them for every late fee, etc., allowed by the lease.  Meanwhile, market the space and try and get a new tenant.   Once you do, begin the termination for non-payment process that your lease (hopefully) spells out.   Then figure out if you are going to sue.  Hopefully your lease is strong and calls for recovery of all your costs associated with this process (ours, for example, allows for recovery of all costs associated with the lawyer as well as filling the space, and it even allows us to sue for money "lost out on" if the new tenant signs for less than the old tenant).  

Above all, no matter how the tenant acts with you, keep your cool and act "all business".   If it winds up in court, you don't want a trail of emails/texts/etc. that present you as anything but businesslike.       

Well, in the equation, r is the rate per period. 

Perhaps you're thinking of nominal vs effective interest rate.  See

https://global.oup.com/us/companion.websites/9780190296902/s....

I'd ask your attorney to review your lease and explain whether they have an argument or not (and whether you properly noticed them or not). 

It is site-specific, but you might be able to also provide a means for the work to be completed safely while still allowing the businesses to be open (e.g. a temporary scaffolding like structure that covers the sidewalk area but has a top decking to it that will prevent any dropped tools/materials from the roof from killing anyone below).  It's obviously a big expense and will put your job on hold even further, but it can be done. 

Should we assume then that you have no forced air ducting in the house for A/C or anything?

You'll lay out a lot of money to get 5 separate meters (which, in addition to the meters which aren't free, will mean a lot of conduit running and probably a few more distribution panels) before you ever even get to the cost of installing 5 new electric heating setups (whether it be electric baseboard or heat pumps).   So your cash outlay will certainly be cheaper to just replace the boiler.   

Just raise your rent to offset your gas bill increases.  Even if you went to separate electrical feeds, you'd have to redo your leases anyway. 

And what is the age of the current boiler.

There are still laws governing commercial leases (and I assume you are not referring to multi-family or any type of housing), and these vary from State to State (and possibly even locally).  But it is certainly true that there are less tenant protections and  easier eviction processes for obvious reasons.   Commercial landlords aren't generally throwing grandmas out on the street.   

Travis, you are qualified.  My business partner and I are Civil/Environmental P.E.'s and we've done our own cost seg studies.   You need to get your hands on a few example cost segs to use as templates (there's a fair amount of boiler plate language in the report itself) and you'll be able to figure it out from there.  

Folks will need the city of the project to answer.