How We Took Our First Commercial Property From Vacant to 18 Tenants

by |

Picture this for a moment. It is January 1, 2009. The worldwide financial crisis is upon us. Companies are not moving or taking risks. And we own a vacant 10,000 square foot building in desperate need of tenants and rehab.

Hi, all! Liz back this week to share the story of our first commercial property — the challenges we faced and the lessons we learned along the way. One of the major reasons we bought our first commercial property back in 2007 was because after running the numbers, we were super excited about the cash flow we were going to make when fully leased by one tenant. Don’t we all love the idea of lots of “cash flow?”

Well, at the time, we were still fairly new to real estate investing, and we made a HUGE mistake. We did not look at the downsides of this deal, only the upsides. So we proceeded to buy the largest piece of real estate we own to this day: a 10,000 square foot commercial building in downtown Trenton, New Jersey. Owning and managing this property has been a roller coaster ride, so I thought I would share the case study and the learnings that we have gleaned along the way.

Related: How to Use a Master Lease to Acquire Commercial Real Estate With No Money Down


As I shared, the building is 10,000 square feet. It is only one story, so the building looks a lot smaller from the outside than it really is. There is one main entrance in the front of the building. Before we renovated the building, when you walked in, there was a lobby and some office spaces. There was lots of open space, in particular towards the back of the building, which consisted of 4,000 square feet.

Before we bought this commercial property, our portfolio consisted of about 20 residential units. We owned some multifamily buildings and single family homes. We certainly had more knowledge of the residential side of real estate investing compared to the commercial side. A friend and commercial broker brought this deal to us. The current owners were “owner occupied,” meaning that they owned the building and utilized all the space for their own organization. The organization was a nonprofit, and they wanted to move their space outside the city. When we did our financial analysis, we were excited about the cash flow based on the current market. Our plan was to have one tenant rent the entire space (10,000 square feet), and we would be in a good place financially!

The First Tenant

Shortly after closing, we learned of another nonprofit in the Trenton area that was in need of space. However, the catch was that they only needed a short term lease for one year due to the fact they were in the middle of constructing a brand new building for themselves.

In the commercial world, that is a very short time frame. For many commercial spaces, you won’t be able to get a lease less than 3 years. However, we did not have any other prospects for a tenant, so we agreed to their terms of one year. We figured this would give us time to find a long term tenant, and we would be achieving our “cash flow” goal in no time!

As the lease end date quickly approached, we did NOT have any other prospects to rent our space. The good news was that the current tenant wanted to extend their lease for a few more months, until December 2008. The bad news was that 2008 marked the beginning of the financial crisis, which I am sure you remember fondly.

Making Lemons Out of Lemonade

As 2009 began, we had an empty 10,000 square foot building and no foreseeable prospective tenants. The financial crisis was impacting the global and local economies. Commercial leasing was negatively impacted, especially in an urban economy like Trenton.

So, my husband and I had a choice — like we all did as real estate investors. We could try to sell this building, but the likelihood of that happening was extremely slim. We needed to rent this building and fast. During various brainstorming sessions and conversations with many people in our network, we decided to convert the building to a “small business center” where we offered conference room and office space to small business owners and entrepreneurs. We committed to a new plan for the building and got to work quickly!

We received a loan from our bank and invested money in renovating the inside and outside of the building. We even renovated it with some “green” features; that way we stood out. For example, the carpet we used was made from recycled soda bottles, and the paint had a low VOC. There was only one building in Trenton that was offering office space to small business owners, and we were good friends with the owner. Therefore, we knew we could be a resource to one another as we both worked hard to lease our spaces. At the same time, we knew we needed to make our space stand out and offer some unique features.

We offered (and still do) the following that helped our marketability:

  • Virtual office space
  • Conference room rental
  • Access to small business counseling (SCORE)
  • Affordable and flexible lease terms
  • Entrepreneurial and small business environment

Where We Are Today

Well, I have to say, we have come a long way since 2007. Once we renovated the building, it took a lot of hard work and diligence, but we slowly yet successfully leased the building. Eight years later, we have 18 small business tenants that utilize space anywhere from 100 to 3,000 square feet in the building. We have two different sized conference room spaces and a seminar space that can sit up to 50 people.

Offices on Mezzanine: Before

Offices on Mezzanine: Before

Offices on Mezzanine: After

Offices on Mezzanine: After

Lobby: Before

Lobby: Before

Lobby: After

Lobby: After

Outside: Before

Outside: Before

Outside: After

Outside: After

We are cash flow positive and currently have only one vacant office. I have to say, the coolest thing about this building is the community that has been built. We have attorneys, real estate investors, financial advisors, career counselors, nonprofit organizations, and many other tenants that network with each other, help each other, and give business to one another. It is really amazing to see this in motion. You can’t put a price tag on this, but it certainly adds to the marketability of the building.

Learnings & Conclusion

As with any real estate deal, you have the choice to learn and grow, or you have the choice to throw in the towel. We chose to learn, grow, and make lemons out of lemonade.

Lesson #1: It is not what you want, but what your market demands.

When we purchased this 10,000 square foot commercial property, we had a vision of one tenant occupying the building. However, the economy and local market did not align with that vision. At the end of the day, it does not matter what we wanted; it mattered what was happening in the marketplace. Remember — markets are in charge, not you!

Lesson #2: Offer something that no one else is offering.

We created a space for small businesses that no one else in our market was offering. Not only did we offer affordable small business space, but we created a community for these small business owners to network with each other.

Additionally, we offered free business coaching, educational seminars, flexible lease terms, virtual and conference room space. Regardless of the real estate investing niche you are focused on, remember to offer something unique so you can stand out from the crowd.

Lesson #3: Invest in an area, not just a property.

Not only do we have a cash flowing property, but improving our building has improved the area in which the building is located. We decided to invest in more deals on the same block — a block (like many in Trenton) that is in need of revitalization.

Related: How to Build Credibility to Make Your First Big Commercial Real Estate Deal

For example, here is our current activity on the same block: (1) we are in the middle of construction of a gut rehab on the same block that is converting a vacant dilapidated building into 4 apartments and a storefront; (2) we are in negotiations to buy another large (and anchor) commercial and residential building on the block; and (3) we just made an offer on a foreclosure that has no windows! Bottom line: We can make a real difference in this community by not only investing in one property, but multiple properties on the same block.

I hope this story of our first commercial property and the lessons we learned as a result have been helpful to you.

Every deal can teach you something if you allow it do so.

What lessons has real estate taught you recently?

Leave a comment and let me know!

About Author

Matt Faircloth

In 2005, Matt founded The DeRosa Group along with his wife, Elizabeth. At the time, the two person company owned and managed two assets – a single family home and a duplex. Over the last nine years, they have grown the company to a 12 person team owning and managing over five million dollars in residential and commercial assets throughout the central NJ and Philadelphia area. One of DeRosa’s mantras is “to make money while making a difference.”


  1. Ayodeji Kuponiyi

    Thanks for sharing Matt! Real Estate has taught me to be patient This goes with doing due diligence, analyzing a property, and picking the right tenant. Patience is key. Haste makes waste. Another thing Real Estate taught me is Numbers > Emotions meaning let the numbers be your guide not your emotions.

    • Elizabeth Faircloth

      Hi Ayodeji,
      Thank you so much for commenting and sharing your thoughts. I completely agree how important patience is. I love that quote, “Haste makes waste!!” And you are absolutely right about numbers being more important than emotion.
      Thank you for reading!

    • Elizabeth Faircloth

      You are too kind! We continue to learn, grow, and work hard to make improvements in all that we do. This really is the key to success in this business. We are certainly far from perfect!!
      Thanks again for commenting and reading!!

  2. Michael Buffington

    There certainly is a demand for this type of rental space and something most real estate investors overlook. In my small town of 8k+ people (county is 40k+) I own and manage a 20k+ sq ft office/retail building in downtown that is 100% occupied when the rest of downtown has vacant office space everywhere. Our offices range from 500 sq ft to 3000 sq ft, but the only common areas are the lobby and restrooms.

    I just purchased a building on the same street/square that is currently occupied, but have considered something similar to your concept when the past owner/commercial tenant leaves in 2016. I will have 6k+ sq feet to work with. Would you mind sharing your rental rates and any fees you charge? Feel free to send me a private message if you don’t want to post online.

    Thank you for sharing your story! I have booked marked it so I can go back and read again. You have my gears rolling on my future project.

    • Elizabeth Faircloth

      Hi Michael,
      So glad to hear that this was helpful to you and your gears are turning! Typically we charge anywhere from $20-$30 per SF with a fee for common area maintenance, internet and utilities on top. The fee is based on the percentage of building they rent.
      We also have a few people who rent a virtual office which consists of a mailbox and use of our conference room. We charge $100 a month for this. I would be happy to email you our rental fee sheet, just message me with your email address! Happy to help you!
      Good luck!!!

      • Hello.
        I own a similiar building in Illinois. Was thinking of doing a similiar concept.
        Mine might be in a better area but the building is in worse shape. Can you give me your rental fee sheet?
        Thank You and good luck!!

        William P

      • Hello Elizabeth,

        Just seeing this post a year and a half after you made it. I’m looking to rent out a 14,000 sq ft commercial warehouse which just kind of fell into my hands, and your post was inspiring.

        I have a couple questions which I thought you might be able to help with. First, where did you go looking for commercial tenants? Like you were before your first commercial property, I’m accustomed to residential real estate and have less experience with commercial. Second, I’d be interested to see that cost sheet you mentioned being willing to share with another user, if that’s still possible.


    • Elizabeth Faircloth

      Thanks so much for commenting and reading. So glad that it has inspired your “inner self.” The process we have experienced with this building has certainly taught us that lesson – continue to try super hard, improve, make changes, and don’t ever give up. I would not be telling the truth if I said it has always been an easy process. It hasn’t!! However, it has taught us a lot – beyond real estate investing certainly!
      Good luck to you!!

  3. christopher zito

    This is great. We are going through a similar situation in Tampa. We just went under contract on our first commercial building and we are thinking of converting it to “Executive office space” it is highly in demand and offers us some protection when the current tenant leaves next year.

    Thanks for the article!

    • Matt Faircloth

      Hey Christopher,
      We have found it to be a great model as long as the tenants have similar business work habits. Also make sure that you bill out for the tenant’s share of the utilities and Common Area Maintenance (CAM) which is standard practice in this type of real estate.

  4. zarak sharwani

    Thank you for sharing your encouraging story & pics are great too! I have also been doing residential only but came across a great office building! I am in process of acquisition & then rehabbing it. Its 20K sq ft building & i’m not sure how long it will take me to get it occupied. It has 3 floors and I was thinking of designating a floor to small businesses and apply your model but not sure on how to go about it? any advice or resources would be greatly appreciated 🙂

    • Matt Faircloth

      Hey Zarak,
      A few ideas –
      Create at least one common conference room and a common kitchen for the tenants to use. That way they will be willing to lease smaller spaces from you to meet their needs.
      Have a variety of unit sizes to accommodate several different sized companies. I found that 100 SF will lease to a single operator that is currently working from home and having their meetings at the local coffee shop. The 500 SF space will lease to the small business that wants to be part of a community.
      Offer the conference room to a local networking group, the chamber of commerce, and any other active community at no charge to get the word out.
      We used Craigs List for most of our marketing and had success with it.
      Let us know how you do!

  5. jeremy hunter

    Hey thanks for the article!
    It gave me some ideas about what to do with commercial spaces. I have been wondering what people have had in the ways of ideas to utilize empty spaces to fill them up. There are always ideas out there and sometimes a little out of the box thinking is required especially with how the Internet helps companies in many ways, being able to make technology and space work to bring tenants in should be pursued.

  6. Peter Mckernan

    Hello Matt,

    This is a great story of adapting to the current market conditions and moving to what will suit you the best for the current forecast. As someone looks and the cards stacked against them you took the head on approach and were able to make the right adjustments! Congrats!

Leave A Reply

Pair a profile with your post!

Create a Free Account


Log In Here