Investment that Supports My Day Job

[Emily Runyan]

Investment Info:

Office Space commercial investment investment.

Purchase price: $485,000
Cash invested: $350,000

This is a property my partner and I purchased as a residential home. It is a 1947 cottage home that was zoned MRO. We put $165,000 into the remodel and conversion to a commercial property. We converted it from a 2 bedroom, 1900 sq/ft home, to a 5-office, 2 bath, 1 kitchen and 1 lobby, property with a parking lot. I am renting this space to my psychotherapy private practice, and am growing my therapy practice from a solo to a group practice of 10 full time therapists.

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

I wanted an office space for my therapy practice. This was an ideal location, size, and feel. It is a cottage home that is perfect for my boutique therapy practice. It is in a prominent area of town. It was zoned MRO, and is located in a neighborhood where residential properties are being converted to commercial office spaces. It is a strong appreciating area.

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

It was FSBO. I met with the seller several times to get to know her, find out what she most wanted from the sale. She wanted to be able to sell quickly and move out quickly, without inspection headaches. I offered her 4 different options, with varying levels of contingency. Originally she was set on not budging from the listing price of $550,000. But with the varying offers, she chose one that had no inspection contingencies - $485,000.

How did you finance this deal?

Residential rental loan, 20% down.

How did you add value to the deal?

We invested approx $165,000 - $180,000 in remodel, parking lot, landscaping, signage. The property has been converted by zoning to a commercial property. We anticipate it will appraise for around $1,000,000.

What was the outcome?

We will be doing a cash out refi. My psychotherapy practice has moved in and is paying rent, utilities, etc. This is not a cash flowing property, but it is serving as a great deal for my therapy practice, which is growing and will become an asset to our community as well as a strong source of passive income. When we cash out refi, my partner and I anticipate recouping the cash from the remodel, with an additional $200,000 - $400,000 above that. We will reinvest our profit into other properties. 

Lessons learned? Challenges?

We learned lessons about finding a good contractor. We fired one and then my partner found a great one through another fix & flip investor in town.