Buying first warehouse.... words of wisdom

[Dean George]

I have a growing business that is in need of a larger building. I am thinking of buying a 10000sq ft warehouse in town.

Would love feedback.

Currently Renting

We rent around around 6000sqft of light industrial for $2500/month gross ($.40/sq ft). Not a great building, functional, but lots of leaks and no HVAC, etc.

We need around 8000sq ft - so figuring paying more like $.45/sq ft for a slightly nicer building we'd be around $3600/month

Potential Purchase

There is a 10,000sq ft building with two cargo doors, loading ramp, dock and high ceilings very near our current location. New roofing, easy access off the street.

It's near a sub-station and the railroad tracks, but it's not a bad part of town at all. Just... industrial. Older building (1965? Brick/Masonary construction) with new paint so it looks fancy

Offered around $775,000 and my broker thinks they will take $725,000.

Since I will buy the building and install my company in it, we should qualify (if I can survive the paperwork) for an SBA loan of 10% down. I've got that in cash, so we're cool there.

The note will be around 5.25% for 20 years and that means around $4400/month (without taxes, insurance, etc). So, maybe $5k/month in total cost to me the owner.

If I charge my company $.40/month in rent (being conservative even though the building is nicer than our current location), that's $4000/month gross rent I collect to pay the note.

Obviously we're not cash flowing here, I have no interests in being a 'real estate tycoon' I just see a chance to get a building for reasonable price per sq/ft and have my operating company cover most of the costs.

That will increase expenses at the operating company, but frankly I could use some more expenses or the IRS is going to get it all at tax time. We aren't rolling in dough, but we do pretty well. Does this pencil?

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So, good people, what do you say? My company could also take 8000 sq ft and sublet the other 2000 to make up the difference, perhaps at a higher rent?

Is it crazy to buy into a commercial building that doesn't cashflow?

What am I missing, what am I not asking?

**I duplicated this on another business forum, looking for all the angles**