First Office Building to Purchase

[Peter Vance]

Investment Info:

Office Space buy & hold investment in Tupelo.

Purchase price: $395,000
Cash invested: $1

My brother and I purchased a 15 unit office building back in April. This office build was quite a bit older and needs some work. I loved the building as it sits on main street in a growing downtown area of a smaller city. The building was built in the 30s as girls home and you can tell as the offices are small square shaped rooms with closets and connected rooms. Lots of potential!

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

Being my first commercial space and only my second real estate deal, I was interested in anything. Running the numbers as to the cash flow and the potential of the location, I didn't see how I could pass the opportunity up.

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

I saw this deal on social media for some realtors that I follow. The owner is a local investor and was needing to free up some cash, so I spoke with the broker who deals mostly with investors about the property. Someone had already put an offer in, but during the 15-day due diligence period, started to balk on some small issues. There were some issues with how the utilities and items were setup, but we offered a quick close under the original asking price and the investor was ready to move.

How did you finance this deal?

50% bank loan and 50% private lender.

How did you add value to the deal?

By closing quickly with mostly private money, the investor was ready to cash out. All of the rents were well below market and the utilities were being paid by the owner. Small cosmetic improvements of updating the outside paint, inside paint, and new signage, our 90 year old building will have a new face.

What was the outcome?

We are only two months in and learning the old leases were very handshake with no systems and the utility setup is a mess. Once we can get systems in place, and new tenants, this building will be a cash flowing machine.

Lessons learned? Challenges?

Challenge will be to find long-term retail tenants for the upstairs units. The cosmetic updates will add incredible value to the building and future tenants foot traffic. This area is a high traffic area, but also a tough parking situation.

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

Blake Whitehead is a great broker for Gumtree Realtors in Tupelo that I would definitely recommend to anyone in the area.