First commercial property

[Dan V.]

Investment Info:

Industrial buy & hold investment in Virginia Beach.

Purchase price: $180,000
Cash invested: $20,000

It's a 3000+ square feet 2-level commercial flex space condo unit located in an industrial zone. The space has an office and warehouse/storage on both floors. Needs cosmetic updates only and will be rented at triple net lease.

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

Flex space (office with warehouse) is a hot market right now and the property is located in a desirable industrial area.

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

Thru a commercial agent. This property was listed in regular MLS so we got lucky to found it first and made offer quickly. We offered the full asking price for it.

How did you finance this deal?

Commercial loan from a local credit union for the 80% and business savings for the 20%. The bank we got the loan from was the same bank who denied us for the purchase of mobile home park.

How did you add value to the deal?

The property is in good shape, needs a few updates to get the desired market rental rate.

What was the outcome?

We budgeted $20K to upgrade kitchen, baths, flooring, lighting and paint. One of the contractors we brought in to give the estimate was interested in leasing it, so we made a deal to lease it to them, we pay $10K upfront and $10k as rent credit for 6 months. We will charge them market rental rate at triple net lease.

Lessons learned? Challenges?

Keep your eyes open! My main focus when I started investing was on residential properties but when the opportunity was presented to me, I taught myself how to underwrite commercial property, research the market and run the numbers. Build a relationship! I sent loan applications to the same lenders/banks who denied us for the previous deal we had, and most of them are willing to fund our deal this time. We got better rates and terms by doing so!

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

Yes, we worked with a commercial property agent, an investor-friendly credit union and, of course closing attorney.