Strip Mall/Building Value

[Tim Goddard]

Would love you opinion on price of a small strip mall/building. 

It is off a busy road in a smaller town area (but still in the Dallas-Fort Worth Metroplex). 3 tenants (800 sqft, 2800 sqft, 1200 sqft). Total approx. 4800 sqft. Coffee shop(1200sqft -- Rent 1050/month on a month to month-- been here 3 years), laundromat(2800 sqft-- rent 2050/month with 6 year lease-- rent increases by 225 next year and in 4 years-- been here 5 years), and hair salon(800 sqft-- $850/month on a month to month-- been here 15 years). He knows rents are under market value.

Operating costs are only the taxes and insurance. Roof is 2 years old.

Like I said, I am very new to this and would love an opinion on what you think this property is worth. Thank you so much.

[Joseph Gozlan]

@Tim Goddard unless these lease are absolute NNN leases then your OPEX will have more than just insurance and taxes.

The importance with these deals is to understand the strength of these tenants (sounds like all are small local businesses) and how long they have been in business (I'd feel more comfortable with a coffee shop that's been in the same spot for 12 years than one that's been there for 2 years...). 

Lastly, I'd make sure to watch the LTV and your reserves. If the economy take a turn for the worse, you can find yourself real fast with 33% vacancy (one tenant) or 60% vacancy (the laundromat) or worse...

That said, I love those small neighborhood service centers as an investment vehicle for the coming downturn. Just make sure you have the reserves to hold in case you need to turn a tenant spot.