Seeking advise before i place an offer in few hours

[Amine E.]

Looking at a 32 unit office building.

26% vacancy. Owner has health issues and have not been advertising vacancies

Current rents are 52% of market.

Long term tenant. Average tenancy is over 10 years.  Mostly insurance co.

Total of 5 buildings needing cosmetics updating but solid bones, mechanicals... 

Current rent role is $12500

Potential rent role at 100% occupancy is $15500

Potential rent role if rent is increased closer to market should be over 20K

2015 Operating expenses are 20K

2015 Utilities are 36K

Taxes and insurance 22K

Self managed at this time

Asking price is $850 but seller is open to all offer at this point.

I m looking at this a value add to get the building back in shape and leased closer to market. I m thinking 650K. Any advise is much appreciated.

Thank you

[Steve Vaughan]

Sounds like a great find @Amine E.!

I like to offer in the form of a letter of intent (LOI) that outlines 3 options. All cash, seller carry or master lease with option to buy. The prices escalate with each option.

I would caution you to not throw out a nice round number like $650,000.  Sounds like a PFA balloon your sending up that needs to be countered.  I like $651,439 much better.  Make it look like you did a detailed analysis!  Good luck!