Out of state commercial BRRRR with partner

[Austin Chirico]

Investment Info:

Industrial commercial investment investment in Woodruff.

Purchase price: $142,500
Cash invested: $105,000

Bought a distressed commercial property for $142,000. It came with two vacant parcels that we are building storage units on. At 80% occupancy the storage unit building combined with the now rehabbed retail space, the property will be cash-flowing about $25,000 a year($2,100/month at 80% occupancy).Once we are at 80-90% occupancy we will refinance doing 75% LTV and recoup 100% of my initial investment ($105,000) as well as my partners rehab costs (20k). This is my first deal, a commercial BRRRR.

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

cashflow and being able to recoup 100% of investment within 6 months. I also have a very trusted and respected partner who lives in the area. Living in Colorado, this out of state market seemed much more attractive.

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

My friend found the distressed building and needed a place to run his construction company out of. Negotiated with phase 2 completion paid for by seller.

How did you finance this deal?

30% down. financed 70% fixed 4.5% amortized over 20 years. Paid for storage unit building cash and labor to build cash, slab in cash and rehab on commercial building with cash.

How did you add value to the deal?

rehabbed the retail space making it rentable again, rehabbed the warehouse space adding value. The biggest improvement in terms of cash flow was adding the storage units on the "free" parcels this property came with.

What was the outcome?

We just closed! Rehab is underway and we are pouring the slab for storage unit now. Once initial investment is recouped my partner will become 50% partner in both the commercial building and the storage unit business.

Lessons learned? Challenges?

Steel prices went up over 70% since our initial quote. storage unit building went from 32,000 to 52,000. Also, gave the seller's agent too much information about our ideas for the property (storage units) which came back to hurt us during negotiations (paid asking price). We did however convince the seller to complete another phase 2 environmental on the property as it used to have underground storage tanks on the property. Learned a lot about environmental issues and soil remediation.

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

represented myself at closing, wasn't crazy about the sellers agent.