53k sq/ft conversion potential FIRST DEAL. Am I crazy?

[Daniel Rojahn]

I am a newby. I have spent about 6-7 months just inhaling BP (and other) real estate podcasts, audiobooks, and picking the brains of investors I have networked with. I have analyzed, walked through, and even offered on a few single family/small multi-family properties (though all fell through at negotiation). I really want to aim my sights higher though. How high?

I recently found a 53k sq/ft building downtown in a relatively small but active city in an improving area. It was used for manufacturing. It could, by my estimate, house 50+ units if converted. Nearby apartments rent for upward of 1k/mo for similar units. Would be grossing between $500k-$700k annually just in rent and there is plenty of extra space for storage units to rent out as well as space for coin laundry. The craziest part is that it is for sale for under $300k. I can hear the "Something HAS to be wrong!" comments already and I get it, it sounds WAY too good to be true. I'll be taking every precaution as far as inspections, checking on zoning restrictions, insurance requirements, etc. before making any moves. I'll be walking through this weekend with another investor and a commercial real estate developer in the area to get a first glance. It was for sale for $700k just a few months ago (still cheap) and although, yes, the rehab will be massive and expensive, I love the idea of and concepts found in commercial investing and I feel this could be a great opportunity (you never know if you don't look). I will be looking for syndication and partnerships for this deal as well. I have my agent looking at cap rates in the area and he is going to do some more research on the building for me. I will post a follow up comment in the thread afterward. In the meantime, wish me luck!