Commercial Questions!

[Jason Merchey]

I have a 6500' 2 story commercial project I am two weeks into my DD on. It's a real fixer upper - little updating for the last 20 years, leaking toilets, some old water damage from a leaking roof (I mean LEAKING). I could go on. Basically, it's a great market, superb location, 2 story stucco building that needs a lot of TLC. It's going for $70/foot off the ARV. Elec, plumbing and structure and roof seem okay. HVAC system is old and a bit odd.

My plan is to spend between $20-$30 per foot to remediate all that damage and bring it up to Class B+ (there is no elevator). There are also no sprinklers. I would be spending less than 50% of the value of the building on reno.

1. Do I need an elevator or sprinklers, code-wise? Or will the building be grandfathered in?

2. Should I am to flip it for a 35% profit, or grab 45% equity and hold on to it using a loan at like 5%?

3. My realtor would like it to be a little more lipstick and mascara than I would; maybe it's because I might want to keep it, or maybe it's because I'm a perfectionist. Should I go $20/foot in an attempt to maximize profit but take a hit on my ability to get class A tenants, or should I go $30 and do some extras that will really make it pop and thus easier to rent, sell or hold? 

4. Any other general tips for commercial - this is my first time. I would be putting about 45% of the capital in and borrowing 55%. I am 75% likely to qualify for a commercial loan. My broker is going to tell me what offers I got come Monday or Tuesday. 

[Bill Florence]

Our last commercial project was originally not in current ADA compliance when built (early 80's), and due to the extent of the renovations the county required us to bring the building into compliance, which was lots of $$$$$. Not sure if it applies here but FYI.