First Commercial Building! (Deal #4)

[Tucker Mortier]

Investment Info:

Other buy & hold investment in Minneapolis.

Purchase price: $500,000
Cash invested: $40,000

Woohoo! 🎉 Commercial Real Estate here I am! This deal was nothing short of amazing. From creative financing, to a laundromat, and allowing me to step into new territory.

What made you interested in investing in this type of deal?

I was looking for another duplex to purchase and Brandon Turner's The Stack method kept coming back to me. My first 3 deals were duplexes so this was a way to step out of my comfort zone, dip my toe in CRE, and have a nice buy & hold investment.

How did you find this deal and how did you negotiate it?

Found this deal on-market and it had been sitting for over 30 days (recurring theme with all my other deals). After touring the property I proposed a seller-financing offer that would give me a lower monthly payment than current interest rates and would give the seller a slightly higher sales price. It worked for both of us!

How did you finance this deal?

6-yr seller financing. After the 6-year mark I plan to refinance!

How did you add value to the deal?

The current value-add is all in the financing. The future value-add will be with rehabbing units and potentially acquiring the laundromat.

This property is currently on the Minneapolis 4d program which essentially has parameters around the yearly income the tenant can make as well as rent limits. The bonus is that the tax bill is significantly lower.

What was the outcome?

Great investment, close to my first deal, great area, on to the next!

Lessons learned? Challenges?

Biggest lesson I learned is commercial real estate isn't as scary as it seems and seller financing is definitely the way to go. With these "smaller" commercial deals there isn't as much competition and there's more room for value add. It's a great happy medium. One of the biggest challenges was the insurance for this type of building- there are much fewer insurers and it's good to get your ducks in a row especially with insurance before pulling the trigger.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Not really! Just the broker that was selling the property. It was a great experience overall and he was very helpful. Also shoutout to Cory Inspects! He did a great job.