Commercial medical building with three separate medical tenants

[Rahul Punj]

Investment Info:

Office Space buy & hold investment in Tampa.

Purchase price: $1,050,000
Cash invested: $400,000

Single story Commercial medical office building with three medical tenants. One long term tenant and two medium term tenants with 3-5 year leases

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

Needed to do a 1031 for my previous home. Focused on commercial, having owned small res multi before. Honed in on medical space because of long term trends in Florida. Liked this specific property - it was slightly neglected, with current owners basically retiring from their medical practice and selling the building- and it had 3 medical tenants, which provides less risk of all out vacant building.

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

listed properties on free version of Loopnet. Also worked with a broker that focuses on medical. This building had been sitting for a few months needed some work... so I was able to get at a good price about 10% discount given that roof needed to be changed immediately.

How did you finance this deal?

local credit union... with personal guaranty. they are good to work with if the deal is low risk (i.e. high down pmt, good credit, and good DSCR).

How did you add value to the deal?

changed roof, did some deferred maintenance and have now renewed two out of three tenants for the next 3-5 years. Also refinanced at a lower rate, inclusive of roof Capex, with the same credit union.

What was the outcome?

Great long term property with solid monthly cash flows and the property value is easily higher by at least 30-40% at this time since we had bought at a slight discount and now have stronger tenant history and CAP rates have gone up over the last two years.

Lessons learned? Challenges?

Commercial medical space is great but hard to find smaller buildings with diverse set of tenants. Also since leases are longer term it's take longer time to add/extract value from the property.

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

Great broker if interested in commercial medical (but moved out of state).
Great loan officer out of Suncoast credit union - they mostly focus on commercial spaces only (especially medical, retail and professional)