All Forum Posts by: Adryan Lado

Hello Bigger Pockets!

My brother and I own a clothing manufacturing business here in Southern California. We are currently in the process of purchasing a business park and plan to submit an offer here soon. We would love to have any input or feedback on what you think about the details. Our primary intention is to own the property  to operate our business from it. The real estate appreciation and investment aspect is only a bonus!

Subject Property: Commercial Business Park

Asking Price: $4 Million

Our business will occupy 51%. We will be financing this with 10% down and the rest through an SBA loan at a blended rate of roughly 3.35 interest

31,000 Sq Feet
17,000 - Executive Office Suits (22 units)

Rent Roll:
Offices - $5,200
7 Units are being rented by 5 tenants
Parking - $500
Gross Revenue: $5,700

When we purchase the property, we will use all of the industrial space in the park and will occupy an additional 7 office units. This means there will be 10 office units that are delivered vacant. Our business will have staff available to property manage and get tenants for the remaining units.

Why we like this property:
Cost Per Square Ft Comparison
Subject Property: $1.30 per square foot
Other Commercial Properties: $2.30 per sq foot (Better construction / High Ceilings)

1.) New Metal Construction on Industrial Building

This building was built in 2019 and was built for light manufacturing (15' ceilings) using metal construction which is cheaper then other construction methods. It has no obstructions in the warehouse and would require no modifications which would reduce our move-in expenses.
2.) The office units are executive suits and are about 600 square feet.

***My question is***

#1. What are the cons of a metal industrial building? 

#2. Is $130 per a square foot a fair price to pay for this type of property that includes a combination of industrial property constructed of metal and executive office suites that are generic in nature?

#3. We will be opening up a new LLC which our manufacturing business will rent from. If our business rents the property at fair market value, this means the business park would be bringing in gross rent of $21,000 while still having 10 office units vacant. If we can get these office units occupied, we estimate bringing in $28,000 in gross revenue per month.

#4. With the metal construction(cheaper price per square foot) would you say $4 million is a fair asking price to pay? I figured that we could get this business park to bring in $336,000 a year. If I estimate 25-30% toward expenses, I figured this would be valued at $4,700,000-$5,000,000 based upon a 5 cap.

I would love to hear everyones thoughts!

 

@Roy Cleeves @Melanie Dupuis - Thank you so much for your responses! I will be calling the title company tomorrow to discuss this!

Out of curiosity, would the title company be responsible for checking up on un permitted construction for the extra 2 units? 

Since I made this post, I came to a new realization - 

The tax records show it as this as an SFR, 1,000 square feet, 2 bedrooms/1 bath - On the MLS, it was marketed as a triplex(in a multi-family neighborhood) with 4 bedrooms/3 baths, 2,000sq feet. 

I guess my question comes down to this. Would title insurance even cover this or is this something a real estate attorney needs to get involved with since the sellers agent said in a text message and phone call they were permitted and did not provide any disclosures?

Hey guys! In a situation and wanted to throw it out there just in case anyone has some input for me!

In July, I purchased my first investment property. Listed on the MLS as a triplex.

2,000 sq ft

Main house: 2/1

Converted garage(Studio): 1/1

Studio: 1/1

Year built: 1960

Location: Ontario, California (Inland Empire)

Here’s the problem -

The neighbor filed a complaint which brought the city to do a home exterior inspection today.

He stated there is no permit in his system since the year 2000 that showcases anything on this property as being built - He says the back two units (converted garage + Studio) should not be there.

He let me know that there is a chance that there were permits pulled prior to 1999 but I’ll figure that out once I receive the county accessor document that they just mailed me today.

I called the seller’s agent immediately after. I told him you have everything listed as a triplex. Did you know these back units were un permitted? I had texted you if they were and you had said yes.

He stated that the back units were there since the Vietnam war and that the landlord originally had permits to install solar units on the back units in 2016. The installation of the solar panels were permitted and approved by the city and there would be no way they wouldn’t have seen those extra 2 units earlier as they installed the solar panels on them. 

I called my buying agent - He did not ask if they were permitted as everything was marketed as a triplex. He had also not been informed by the selling agent and there was nothing on our contract to disclose them not being permitted.

I realized I made a HUGE mistake in not verifying this information(noobie mistake) in further detail to ensure what was permitted or not.

I also realize that there is a chance that the permits were pulled prior to 1999 and everything is okay here. That’s the good news -

The bad news is everything was done with out permits and there is no record on file going back to 1960. In this situation, I would imagine that I have to demo the back units, kick out the tenants, and re-do it from scratch?

What do you think is the likely outcome here and what can I expect moving forward?

Thank you so much for your response Victor - Adding an ADU is definitely in my plans! I'm actually awaiting a response from the county on this. At this time, based upon my research, I am not 100% certain they would approve my plans for an ADU since my property is located on a hillside without adequate parking. If It gets denied, I would consider adding a second drive way to my property which would the tenants to have 1 car in the garage and 2 on the drive way. Do you have any experience with this restriction?

Wow - this is an amazing thread. I have been operating my screen printing & embroidery business for 9 years. As soon as Covid struck, we pivoted to manufacturing cotton face masks. It was a blessing - In May, we were doing 1 million in revenue each week and our business grew 10x-15x.

Never did I think I would be in the position to have this much money. It's a bit nerve wrecking, but I decided I will be making my first investment into real estate. It's really cool to read everyone's responses as well - Here's what I'm planning on doing first million -

I am going to be buying my first investment property in Los Angeles at $430,000 in cash and spending $125,000 to rehab it. From there, my all in costs would sit around $575,000 and my ARV would be at $685,000 leaving me about $100,000 in equity. I am going to rent out the rooms individually and hope to break even on mortgage after I refinance out. I'm not concerned with positive cash flow as much as I am in building long term equity as I have my own business that makes me enough cash flow.

I like the thought of renting out the rooms in my investment property because I currently rent out my own 4/3 house and collect $2,800 in rent which leaves me to pay $400 + utilities. My plan is to continue to rinse & repeat.

Any local investors have any suggestions on what else I can do with my money? 

Cheers

Hello everyone!

I am looking to invest into my first investment property. It is located in City Terrace, Los Angeles. Your opinion on this would be greatly appreciated! Would you take it?

It's a 2/1 property and I will be converting it to a 3/2 property. It will go from 648 square feet to 1,150 square feet after factoring in room addition and house expansion.

My purchase price will be $430,000 (all cash, no holding costs), and I estimate $125,000 in construction costs and permits.

I will be all in at $555,000.

The comps in the market place let me know I will be able to sell this property fully rehabbed at $685,000.

My financial deal overview is also attached Google Docs Deal Viewer

Any feedback on my numbers and thoughts on taking this opportunity would be greatly appreciated. If there is any more information to provide, please let me know!