Commercial BRRRR Opportunity

[Greg George]

Three partners were 6 weeks away from opening a microbrewery and had a lease-purchase agreement to purchase the property for $515K. The financial partner recently pulled out for personal reasons. The remaining two partners stand to lose the building and the $200K they already had invested in renovations. The seller would allow us to buy the building for the $485K they currently owe on the lease-purchase option and we would lease the space back to the microbrewery so they can open up in that location. The building was appraised in 2018 for $515 pre-renovation. The ARV is estimated at $750K and will lease for $16/sqft or $4,700/month. Owning a small percentage of the microbrewery is also on the table.

I conducted the due diligence on the microbrewery and believe it will be a very successful venture. The risk is that with 6 weeks to go they are undercapitalized and if they pulled out I own a building that needs another $100,000K in renovations before leasing to another tenant. I am confident, however, that they will raise the capital. There is room for financial partners with the vacancy left by the partner that pulled out and they have 2 investors interested. I have at least 2 investors interested myself.

My plan is to hold this investment long-term and use the BRRRR strategy to refinance and recoup my initial investment as soon as practical.

The investment seems sound and I understand the inherent risks involved. Is there anything I am missing? This would be my first commercial deal as an investor.

[Glen Gallo]

seems thin to me. I am not an expert. lots of missing information

what I don't like

Beer Business sole occupier

Dont get me wrong I love beer but that business model is saturated. Combine that with the pandemic 

The other guy pulled out why? Maybe he was right but more importantly he was not fully committed for this start up. A really dangerous way to start a business and sink money into it. What other mistakes have they made? What track record do they have success in if any

Agent owner that is bailing out seems to be controlling the narrative and profiting one way or other at exit

I would never want a piece of my tenants business. Blurs the role.

what is not known from your post

building size-class- location- comps cap-rates-occupancy rates 

how long can you go with no rent. how much can you afford for TI up front and out of pocket

what can the building be repurposed into? 

Tenants come and go

Commercial is a tough market right now.

seems like 2937 stand alone class C at  1.60 per foot

Looks like a resounding no based on information provided.

I see it as a one horse show and I don't like the horse at first glance.

I will defer to the experts