Small Town Warehouse Income Too Good

[Matt Smith]

Investment Info:

Large multi-family (5+ units) commercial investment investment in Kenedy.

6,500 sf Warehouse with extraordinary ROI for a long term income play.

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

After some research, I realized there was a shortage of warehouse space, office space, and commercial space in general. I thought I might be able to lease as a warehouse. After seeing the inside of this ugly eye sore of a warehouse on a small lot, I thought it could be a tremendous opportunity to be able to lease as is.

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

This deal was listed for several years.

How did you finance this deal?

I was able to negotiate a 7% down payment with the seller carrying the note. Win win situation.

How did you add value to the deal?

At first the deal was placed online for lease, in which a broker's client offered to lease absolute NNN for 5 yrs. I made some rookie mistakes, and a partner got a little greedy, and the deal was blown during final stages of signing. As a result, I paid approx $18,000 remodel, repairs, restrooms, electrical, lighting, and ADA compliant. It has since been a great income producing property for over 3yrs.

What was the outcome?

The first couple of years were tough due to the perceived condition. It sat on the market for lease for about 3-4 months, so I painted the outside to improve curb appeal and it has been leased with low vacancy rate for the past yr and a half. Great income producing commercial property that nets the equivalent of $18-$20 hr full time job.

Lessons learned? Challenges?

Never judge a property by it's curb appeal...especially if it is commercial. Older commercial property may be built with higher common sense standards, and better material than what is available today. You may be pleasantly surprised to find some valuable traits that an ugly commercial has to offer inside. It never hurts to look. And, don't be greedy, and don't let partners get greedy.

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

Yes, an agent was involved, but not very helpful for the sellers.