Go for it or spreading myself too thin?

[Jon Gorman]

Hello,

I'm currently considering expanding my commercial investment portfolio.

Here's where I'm at so far:

I bought a 7-office office building for $475k. I'm currently covering all mortgage and operating costs and then some. Currently $353k left on the loan with a bank, should be paid off in ~15 years. My plan is to keep it long term for income in my retirement.

I like this model of purchasing a small office building and holding long term, allowing tenants to pay it off and then it will be income for me when I retire. These are niche tenants in a healthcare field that I know well.

There is another office building I am looking at. Asking price is 390k and it has 4 offices. Operating costs per office are significantly higher than my current building (because it has only 4 offices as opposed to 7), but I have a potential tenant who is interested in leasing out all 4 offices immediately. Assuming I get it for the asking price (though of course I would try negotiating that down a bit), one bank I talked to (who has the loan on my first building) will lend me up to 75% of the sale price, leaving me to cover up to $97,500 + closing costs. I probably have just about that much between the equity in my current home and some savings. The banker said I couldn't take a LOC out on my current office building because they need me to carry at least 25% of the value before they would give me a LOC.

Should I go for it--take out a HELOC on my house to afford the down payment on the second office building, assuming I can get that potential tenant to sign a lease before I make an offer?

Or...is that spreading myself too thin by leveraging too much of my current assets and running the risk that if something goes wrong with the potential tenant, that leaves me in a jam trying to fill an office building with relatively high rent prices?

Thanks for any input!

JG