Thoughts? Mixed Use Commercial Property Conundrum...

[Chris Gossett]

True to my nature, I tend to swing for the fences and have hit several deals out of the park, while also striking out on others. I’m new to Bigger Pockets and it’s really given me some insight into many different investing avenues.

With this said, I need advice....

Two years ago, I purchased a small self-storage facility (35 Units; 1 office; 1 Warehouse (3,500 SF) and was able to obtain financing from the seller and ‘commercial hacked’ the property by converting some of the storage units into three (3) 1/1 Efficiency Apartments, with the ability to add more in the future, and added Climate Control units within the main warehouse area.

Purchase Price: $248,000

Financing: 15 Year @ 4% fixed

We have doubled the income with future potential of increasing income by another $2,000 using the existing structures in place. Current monthly cash flow is $2,000/month at 100% occupancy.

The Equity is there to access; however, I am hesitant to REFI and lose out on the interest rate that we currently have locked in. I also am hesitant to 1031 the property into the current market of Exorbitant prices....

What would you do?

[Chris Gossett]

@Daniel Lioz Thanks for the reply. In the early stages of contemplating this purchase, we were hesitant because the NOI was nowhere near where we wanted to see it. One of the structures consisted of a 7k SF building that housed storage units, an office, and a warehouse, which at the time was being leased by a Commercial Masonry company. The office and a handful of units faced one side of the building and we begun questioning where the utilities were located. The property happened to fall outside of the local municipality and any city ordinance, but was connected to city utilities. As a result, the owner (during the time of construction) ran private water and sewer lines to connect with the City. Those lines just happened to run parallel and 5' from the office and the handful of units. We were able to utilize the existing infrastructure and build out (prior to COVID I might add) - which given the cost of materials then, made it even more worthwhile. Given the improvements, including the incorporation of climate control units within the warehouse, we were able to increase the monthly income by almost three-fold. There is also room for more potential build-outs, but we are looking to capitalize on the current cash flow at the moment.

Regarding financing, because the apartment units and storage units are within ‘one structure’, I assumed we would be unable for receive ‘conventional’ financing for just the Apartments....