Should I Invest in this Commercial BRRRR Opportunity

[Greg George]

Three partners were 6 weeks away from opening a microbrewery and had a lease-purchase agreement to purchase the property for $515K. The financial partner recently pulled out for personal reasons. The remaining two partners stand to lose the building and the $200K they already had invested in renovations. The seller would allow us to buy the building for the $485K they currently owe on the lease-purchase option and we would lease the space back to the microbrewery so they can open up in that location. The building was appraised in 2018 for $515 pre-renovation. The ARV is estimated at $750K and will lease for $16/sqft or $4,700/month. Owning a small percentage of the microbrewery is also on the table.

I conducted the due diligence on the microbrewery and believe it will be a very successful venture. The risk is that with 6 weeks to go they are undercapitalized and if they pulled out I own a building that needs another $100,000K in renovations before leasing to another tenant. I am confident, however, that they will raise the capital. There is room for financial partners with the vacancy left by the partner that pulled out and they have 2 investors interested. I have at least 2 investors interested myself.

My plan is to hold this investment long-term and use the BRRRR strategy to refinance and recoup my initial investment as soon as practical.

The investment seems sound and I understand the inherent risks involved. Is there anything I am missing? This would be my first commercial deal as an investor.