I bought a run down, nearly vacant commercial property. The property consists of 3 Retail units and 3 Office units. I initially invested $250K of my own money (through a HELOC on my home) and borrowed $800K from a private lender. Once I'd rehabbed and rented out the units, I refinanced the property 100%, pulling all of my initial investment out. Net cashflow is around $4500 per month after all expenses including my mortgage and reserves.

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

I saw an opportunity in our fast growing downtown and wanted to be a part of the beautification and vitality of my hometown.

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

It was brought to me by a broker. The property was bank owned and in poor repair. The bank was a small bank back East. They were having trouble getting it leased and just wanted it off their books. It was listed at $1.4 Million originally. They'd dropped the price to $1.2M. I offered $700K and we eventually agreed to $840K. During due diligence, I negotiated a $40K concession because the HVAC and electrical needed about that much work. So, net I really paid $800K.

How did you finance this deal?

I used $250K from a HELOC on my personal residence and borrowed $800K from a private lender. It turned out to be a commercial BRRRR deal in that I was able to refinance the entire amount, leaving me "in the deal" with $0.

How did you add value to the deal?

The building needed a LOT of work:
New roof
New electrical
New windows (more for visual appeal)
All new interiors
New HVAC

What was the outcome?

It's completely leased! And generating roughly $4500 per month in passive income after reserves and mortgage are paid.

Lessons learned? Challenges?

Keep looking! It took me 4 or 5 months of calling brokers, searching loopnet, running numbers....

Then it took me about 6 months to get my first tenant. That time period was nerve racking. But once I got my first tenant, the rest came fairly quickly.

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

The broker I worked with is no longer in the business. However, I've used Eddie Laplante at Next Door Real Estate for the majority of my leasing. He's the best commercial realtor in Merced!