Office Warehouse bought and sold

[Mark Wooldridge]

Investment Info:

Industrial buy & hold investment in Dallas.

Purchase price: $270,000
Cash invested: $100,000
Sale price: $445,000

3 buildings totaling 14,000 sqft - main building 7,000 sqft with 5,000 sqft office space. Other two buildings warehouse - 3,000 sqft and 4,000 sqft. 2 tenants is warehouse buildings and was leasing up main building when neighboring property with explansion plans made me an offer I couldn't refuse...

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

I have always loved commercial property, and especially like office/warehouse as my background is in manufacturing. Also I enjoy dealing with and empowering small entrepreneurs.

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

Found it on Commercial property site, had my realtor contact the other broker. Later I met with the owner of the property who had been a licensed electrician and ran a medium sized contracting business from the location. We exchanged 'construction war stories' and found we had some of the same clients over the years. Property had been sold to a previous tenant who wasn't paying, and who filed bankruptcy to linger a while longer. Took my offer over a slightly higher cash offer.

How did you finance this deal?

70 k down, owner finance 200k @ 5% interest. I put 30k into improvements and carrying costs.

How did you add value to the deal?

Upgraded the building inside/out - repaired 4 AC units, restrooms. Added 3phase power to one of the warehouse buildings for tenant's equipment. And as far as the owner was concerned, gave him a steady income until building was sold and he cashed out.

What was the outcome?

Sold building for significant profit - kept building one year + one day in order to make it a capital gain instead of income.

Lessons learned? Challenges?

We had to get rid of an IRS tax lien that was placed on the bankrupt tenant in order to clear the property for me to buy - I really appreciate good attorneys! Never let a tenant (even if they are the primary one) to collect rent from another tenant - I did the first month and the tenant spent it on his electrical bill "The power company was going to shut me down!" - Also learned to be very resourceful - educate tenants to be better in business - I was paid every cent owed.

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

I'll have to look up those names and add them later