Questions for 1st Commercial Deal

[Joseph D.]

I own several SFRs and am looking at my first commercial deal.  It's a small (6,000 SF) space with an auto repair shop.  Tenant has been there for about a year, $200k asking price, $3k/mo rent.

What questions should I be asking before moving forward?  I have a PM that can deal with the property, but I'm used to running numbers for residential properties.  Is there a good list of questions for small commercial properties like this?

[Joel Owens]

Does seller have a recent phase one in the last 6 months??

Environmental clean up could go higher than the value of the property in some cases.

3k mo rent doesn't mean anything. Is the rent a gross lease,NN,NNN??

Have many years left om the primary lease term? Is corporate only guaranteeing the lease or personal as well?

How old is the building itself? Tearing down can be expensive if it has asbestos etc.

[John Lopez]

Given that the property is a auto shop, you should thoroughly review the environmental aspects of the property. Even if they dont have a recent phase I, make sure you conduct your own. 

Depending on the state it's in, you may also be able to check the state environmental database to see if there have been any environmental releases reported at the property. If you need help with this, just reach out. I do this type of thing for a living.

[Dan Wallace]

As stated above, make sure you are very careful with an environmentally-sensitive-use property. Based on my experience, if there are any signs of spills related to the automotive repair, a Phase 1 engineer will require a Phase 2 review which may include drilling holes and sampling. This can get expensive very quickly.

Aside from the potential environmental issues, you need to understand the lease. If this property is in a small market could you re-lease or would the property stay vacant for an extended period. 

Best of luck.

[Joseph D.]

Thanks everybody!  I think I'm going to stay away from this one, I don't want to run into trouble with environmental issues.

[Mark Lucido]

Good call @Joseph D. - growing up, my parents owned a body shop so I am very familiar with the Environmental issues automotive can have.  I was looking at acquiring a property not too long ago. Check out my story here:

https://www.biggerpockets.com/blogs/8448/54578-pit...