Does BRRRR function for small commercial buildings?

[Gregor Kosorok]

I am looking to buy a very small shop (35 m2) within the existing office building and want to BRRRR it. Does anyone has any experience with such case? Thanks a lot for your answers!

[Katie Neason]

I have done this. The timeline was just longer to maximize the refinance value. I purchased a vacant commercial building (about 6,400 sf) on Main St. (March 2016) and got an 18 mo construction loan that rolled into term financing from a local bank with a portfolio loan.  Did an extensive remodel that took about 10 months. Put 5 tenants in the space. The first 2 tenants moved in Jan 2017. The last tenant moved in March 2018, if I remember right. We seasoned it for a year and then refinanced it in Nov 2019 with a credit union, increased our reserves to $50,000 (About 8 mos of expenses and P&I) and got all of our initial investment out. It cash flows about $12,000/quarter. With that said two, 2 tenants are retail, and I am very concerned with their longevity and thankful for the reserves. 

We are currently in the middle of a second one. We bought a distressed office building with lots of deferred maintenance in a good location (near the hospital and a large junior college). It had 2 tenant and 2 vacant spaces. We are currently renovating the property ($250M rehab budget). We will have the vacant spots ready for lease in the next 30 days or so. Hope to get it leased pretty quick and refinance it. We used expensive money to buy and refi (we had to get the money together very quickly because the owner was facing foreclosure in short order) so we will start the refi process as soon as we get leases  in place. Should be enough value to get all of our money out plus some. Too soon to know how it will turn out. I post about it pretty regular on our fb page if you want to check it out. facebook.com/renovationwranglers.