All Forum Posts by: Chase Gochnauer

 That's the way I read it but I'll clarify tomorrow.

Honestly, I think the value of the property is at least that $412.5k mark if the tenant were to leave. I believe this tenant has been here since 1997 so they have already been in the building 20 years, they are just renewing the lease for another 10. The existing buildings have value.

49k SF warehouse/3200 SF office

Hey guys I have some SFH rentals, looking to add a more passive investment and came across this commercial deal and hoping you guys can give me some tips before I dig further into it.

Price $412.5k
Cap: 8%
Recently signed 10 year NNN ground lease with options & escalators.

I'm new to the commercial arena. This is 14 acres in heavy industrial area with some larger buildings on it. It's my understanding that this would be purchasing the land only, and leasing to the company that has the building. The improvements are technically theirs but they obviously can't a building when lease is up.

What am I missing? 8% cap rate on this investment seems too easy.

I'd also objectively look at your own property. Is it a very nice property, much nicer than the competing properties?

I could see myself being like that tenant if I'd looked at 20 places and couldn't find one I liked and then found one. As you said you like to mull it over for 2 days - if I were a tenant that would be extremely frustrating to me. Do they keep looking at properties or not? I'd try to give an answer the same day as BG/credit check results at least. 

I agree maybe appliances, counter, backsplash. But, as others said if it's just as nice as the competition as-is just leave it, let the first tenant stain those white counters, then replace :)

This is my frustration with college - there are so many generic courses that are mandatory that you have to grind through classes you're not interested in to get to the ones that you enjoy. I wish high school got the gen-ed stuff out of the way and college focused more on specializing. 

I'd recommend a mix of finance-based courses with construction. I think knowing construction basics would be important even if you're not swinging a hammer so you're not giving your handyman a blank stare. Then anything focusing on numbers analysis. 

It's tough to become an investor right off the bat unless you're helping her out. Likely she'll need a day job to support for awhile. Think about what day job she'd like that's related to the industry and courses that revolve around that, also.

Your utility company could likely give you an average historic amount on the property. I'd consider taking a number like that, splitting it by 4 and having a fixed amt per month for the heat. If you're dealing with low income tenants anyway, a spike in monthly rent in the winter time might not work so well.

I'm going to assume this is a low income area by those numbers. If that is the case, I'd be careful starting off your first rental experience in a converted SFH in low income area with mixed utilities. My first one was a similar situation, when I was quite young and now I wish I would have started with a simple SFH in a little nicer area.

To me the issue was less the investors legitimately putting 20% down but the people that "fudged" the down payments. Marked up the $100k house to $120k and the seller would write a check at closing for $20k. This was almost common practice and got to the point it wasn't even frowned upon. Or people that would refinance at 90-100% of appraised value(I believe there were programs to even go over 100%), and appraised values had gotten very loose and they were really upside down on properties. Those are the ones that were left holding the bag, not the ones that legitimately put $20k down on a house selling for $100k. 

 So how do you purchase properties without leveraging existing ones?