Shopping center auction for newbie

[Div Bhingradia]

Hello,

Need some guidance here for an auction property we are looking.

About us:

-3 partners, none have experience in real estate (we have other businesses we run)

- we have enough capital for down, operating and some reserve

-interested in passive income

About property:

-2005 built and property in very good condition (minimal repairs needed after take over)

-auction (foreclosed by bank)

-title search came up clean

-tax assessed value at 2.7mil

-amount owed to bank is 1.6mil (we believe this will be starting bid).

-large 24k building, 14 suites, 10 suites are rented. Out of the 10 suites, there are a total of 8 different tenants.

-no financial data available but we think the rent will be $10/sq ft annual + 2.75 cam.

-10k daily car count passing the center

-near cinema and off a major interstate

Our concerns:

-shopping center has a history of shops coming and going, never been 100% full.

-current owners (4 in total) all abandoned the property few months ago, bank was going into suit with them but trying to recoup from auction first. No other money is owed on property.

-households in 1mile is 2k, 3mile is 11k, 5mile is 18k. Daily count is about 10k.

IS THIS A GOOD DEAL??

[David Monroe]

@Div Bhingradia For your first investment, with no-one on your team having shopping center experience, NO!

Here's why. As you mentioned, the center is never 100% full. The traffic is way too low to get any national credit tenants, and with a recession looming on the horizon, retail spaces with mom and pop tenants are the first to go vacant, and they stay that way for a long time.

Another negative is the cost to re-tenant. No one tenant is alike, and your tenant improvements will be costly. You can recoup them in the lease but you still have to come up with the money on the front end.

I hate to be so negative on this post, but I invest, broker, manage and develop multifamily for a reason.