Help! Better to have a vacant building or a few tenants with 50% vacancy?

[Margot Weatherford]

Hello,

I’m reaching out regarding a unique listing: an 11,000 sq ft historic building located just one hour north of Atlanta in North Georgia. The property features two 1,400 sq ft suites on the main level (one currently leased) and over 3,000 sq ft on the upper level, with 750 sq ft already occupied, 3 small office spaces (+/- 250 sq ft each), and a basement tenant with 1,400 sq ft of storage space.

The building generates $6,000 in monthly gross income from its five tenants, but with full occupancy and market-rate rents, it has the potential to bring in $10,000+ per month.

Given its historical significance, stunning architectural details, and location, I’m curious about your opinion: Would this property be more marketable for sale with or without the current tenants?

Additionally, the owner is considering design plans to convert part of the upstairs into three apartments, adding further value and flexibility.

I’d love to hear your thoughts.

[Evan Polaski]

@Margot Weatherford, I would talk to local brokers.  There is value in each: if an owner occupant is your buyer, they will likely want it vacant.  But only Brokers will know how many of those are really floating around in your market and for that size asset. 

There are likely more investors that will want the cash flow as a landlord, so in that case selling with some tenants, but also room for the investor to finish lease up to help their overall return would be beneficial.

Back to my opening statement, investment sales brokers would be able to give you better guidance. I would talk to several to get their opinion.  I would also talk to leasing brokers for this type of property to understand if there is real appetite from tenants for this type of building, as even if it doesn't directly impact your approach, it will give you some insights into how a potential buyer may be looking at it.