Should I pull the trigger?

[David Ronka]

Full disclosure: My partner and I are complete newbies to wholesaling and commercial real estate. We had no intention of getting into commercial, but in the process of looking for residential properties to wholesale we came across a FSBO commercial deal. It's a 2,000SF former bank branch on an acre lot. Solid construction on a corner lot with plenty of parking. The owner (he was using it as a small church) took a liking to me and my partner, saying, "I like you. How can we make this work?"

I did a crash course in evaluating commercial property, and here are the numbers based on the nearest comps (in terms of potential lease/SF): Most recent tax appraisal: $240,000. Asking price: $230,000. He chose not to list with a realtor who wanted to price it at $260,000. No major rehab that I can tell -- I'm estimating $10k for cosmetics. EGI ~ $32,000 (based on triple net); NOI ~ $20,000; Cash on Return ~ 8.7%; Cap Rate ~ 7.8%; DSCR: 1.5. Zoning says it can be used as restaurant or recreation or retail with a site plan review.

There aren't many comps, so the numbers are rough. I have an attorney who can hold my hand through the process. I'm thinking I make an offer (below asking?) and then market hard to find my cash buyer. But this is my first time around the block AND IT'S SCARY to contemplate pulling the trigger! Any words of wisdom or encouragement out there? Heeeeeeeelp....

[Greg Dickerson]

I would not persue a wholesale based on your description of the seller as highly principled, not wanting to list and wanting the property to go to the right people. If you have no plan to actually close on the property I think he would no doubt be upset especially if you just assign a contract to someone he does not approve of which apparently is why he is not listing. You are essentially doing what a realtor does. This can hurt your reputation in a small town.

IF you do decide to move forward you should offer complete disclosure and transparency. Let them know you plan to find an end user and sell your contract.