Expert Commercial Advice Needed

[Russell VanBlon]

Hi everyone,

I'm experienced in residential (36 units and counting over the past ~15 years) and have a request for the experienced commercial folks..

I'm under contract to purchase a 6,100 sq ft commercial Class B office space in the Raleigh, NC area.  It's in a good area, well maintained 15yr old building.  I'm 30 days into the 60-day examination period.  My plan is to lock in tenants during the examination period, otherwise I bail from the deal.

My problem is: the numbers are pretty good and I want to make sure I'm not walking away from a gold mine.  I don't have a commercial mentor/expert so I'm turning here for any advice:

• If we rent at $22.50/ft/yr that's about $11,400/mo gross rent.
• HOA dues are $1,250/mo and covers the exterior/roof/landscaping
• Taxes are $800/mo
• Insurance premium is quoted at $150/mo
• Utilities are tenant-paid (although negotiable until we find a tenant)
• Property management is 7% or $800/mo

I can carry the mortgage + expenses, but would obviously buy a building with a tenant ready to move in.  My lender isn't a fan of me buying a vacant building for an unknown period of time.  Covid presents somewhat of an unknown risk/reward here.  

To the experienced folks: is this a deal I should walk away from if I don't lock in tenants?  

[Chris Blackburn]

Vacant commercial property is a sweet spot for purchasing- Essentially it is no longer an asset but a liability.  We see vacant spaces at %30-%50 of the price of fully rented.   Your team that does the leasing is a huge part of your success. One other option is breaking the space into very small units for retail.  It becomes less about what your charge for foot and more about the affordability.  A lot of people can pay $1000 a month for a $500 sq ft retail, not as many can spend $4000 a month for a 4000 sq ft space.