Seller Financed Deal "Dallas, Texas" What do you think????

Question

I have a potential seller financed opportunity. I am currently a househacker of a duplex and currently this is my first and only property. I was able to reach out to an owner and build report about his commercial Office Property.

I drove by this commercial property every day and it kept catching my eye. It was the resemblance of a tall grass, old paint job, value add opportunity of a residential SFH. I am very well educated on small multi family, and residential properties, so this fits the traditional condition requirement  for a SFH or residential property that represents an absent owner that would entertain the idea of selling their property.

This property is described as an office building on MLS, but was rented out to a retail tenant, it is currently off market and I have direct contact with the owner. This would be my first venture in both commercial, and office space, so im a bit uncertain and anxious. He was previously renting out the 3,000 sqft property for $10/sqft. The owners are willing to sell to me on seller finance with interest only payments for 5 years. This is the deal let me now what you guys think of it, and if it's worth the investment. Let me know if i have missed anything or have skipped over anything. Thanks in advance!!!

Location- Grand Prairie

Purchase Price- $330k

Down Payment - $20k

Interest-  6%

Term - 5 years

Interest only payment- $1,560/m or $18,720.

Potential Rents- $3,750/m or $45,000

Insurance and taxes- $833\m or $10,000

Total Payment of property-$421k

Im planning on holding the property , until the 5th year. I would then refinance and pay off the ballon payment.

I am also looking into bringing a 50% equity and cash flow partner. Would this be attractive enough of a deal for investors. Thank you for all feedback. This is my first seller financed deal.

Greg Scott · Answer

The two biggest questions you need to ask yourself are:

How long do I think it will remain vacant before I can find a tenant?   Retail space is nothing like residential space.  It may take a long time.

What improvements will they require to the property before signing a lease?  It is very common in the non-residential commercial space for tenants to ask the landlord to reconfigure the space before leasing.  Those can be expensive

Wale Lawal · Answer

@Juan Aguirre

Commercial deals have to be analyzed before you get to financing.

Commercial deal analysis is a specialized skill as you need to have local market knowledge and understanding for various other factors like Cap rates etc.

Get in touch with an experienced agent or investor and shorten your learning curve and save you a lot of headaches as they tend to understand the process better.All the best!

Juan Aguirre · Answer

Hey Bruce, if I go through a bank I am looking at down payment of upwards of 80k, so seller financed is my preference because of the low up front cost of attaining the property. It was previously leased out to a single tenant. This has a two tenant layout and was previously leased out for $2,500/m for both sides. The parking lot has plenty of space (20+), the roof needs replacing which we are discussing who will take that hit, interior needs work, and HVAC is good. In this market everything similar is leased out for $15/sqft+. My intentions are to get two tenants and lease it out for a conservative $14/sqft which will create enough equity to refinance out and pay off the balloon payment in 5 years.

It is in a great corner location with a ton of traffic around it. This upcoming recession does put a negative factor into us being able to lease it. This is also good leverage for us, and that is the reason why the owner is willing to seller finance.

Juan Aguirre · Answer

Hey Greg, in the Grand Prairie Texas market most retails properties have been leased out in a 6 week period on an average basis. The property does have some differed maintenance and will need some work. I am getting my contracted out there to give a good idea on what is needed. Im looking to start on renovations and have the property leased out all within 3 months. I am also bringing in a capital partner to cover those holding costs, and the construction budget.

Bruce Lynn · Answer

Could you get bank financing on this?   If so what would that look like today?   Will that look different in 5 years?

Is it single tenant or multitenant?

Who do you think would take the space?

How's the parking lot?  How's the roof?  How is interior?   How is HVAC?

What's your competition and what is rent on/at your competition?

Why do you think you can charge more than they can?  Are you improving the property?

One thing to think about is 90% of small businesses go out of business....we're moving into a recession....so even if you can get someone to sign a five year lease or longer, doesn't mean they will stay and pay five years.   Would it be attractive to a national retail type tenant?  ATT, Verizon, AMax Insurance or someone like that?

Seller Financed Deal "Dallas, Texas" What do you think????

Most Popular Reply