All Forum Posts by: Dan Wang

Dan, we are in the Chicago area industrial sector, albeit in the flex, small-bay arena. Given your described building location and post, I am guessing you are single tenant (seems to be the majority in that Elk Grove, Bensenville area). Personally, we prefer multi-tenant, to minimize vacancy risk. But in any case, I would NOT sell a industrial property for STR or multi family. The level of hassle/management is way higher than a good industrial tenant. Industrial vacancy rates for your size building are ridiculously low. If it was dividable into smaller units it would be even easier to fill.

Since you have no debt, you can weather a period of vacancy pretty easily.  

To give better advice, we would need to know what your overall goals and situation are.  If it were us, we would keep the property and take out loans against it for investing in additional industrial property.  That will, portfolio-wide, minimize your perceived tenant flight risk, and over time you'll get to an even better cash flow spot.   But it will depend upon how much you really need that $140k in cash flow right now.   

As for improvements, that is really tenant-dependent. For your sake I would make sure, if you aren't NNN right now, that you at least have RE taxes protection in your lease. I'm assuming you are in DuPage, which is better than Cook, but the long term isn't pretty RE tax wise anywhere in northeast IL.

OP run the numbers.  Add risk adjustment.

$140k/$1mm return.  There are very few investments that bring that level of return.  If anyone says the S&P 500 disregard them.  

You don’t get that type of return in your STRs straight up or risk/hassle adjusted.

Industrial properties the demand analysis is always local and not nationwide.  In a city like Chicago, industrial properties are like ocean front properties.  Only so much exists.  Ask a commercial realtor to evaluate your property both from a value and a rental potential.

How good is your tenant and their contract? Are they NNN?

What does your Capex look like?

If you plan to hold do a Cost segregation if you want cash now.  You can invest that or use to pay down your other loans.

You owe nothing.  The major risk on commercial and industrial is losing a renter.  But you owe nothing thus the risk is low. Check with the commercial realtor. See if you’re in a tight market.  Then the risk of contented is low.  Then having 70% of your income exposure in a great investment and at low risk answers your question.  Consider your self lucky

Versus selling a great asset, again either do a cost segregation or take a loan out to buy other properties.  Personally if it is generating $110k cash flow whether before or after taxes, I would just sit in it.  You can buy a new house every year or pay your 8% down.  

Just run the numbers