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All Forum Posts by: Derek Bell

Derek Bell has started 19 posts and replied 74 times.

@Angel Dejesus

Not selling. Was just curious on when I would pay the cap gains tax. If I do sell years from now I would probably just 1031 the property. 

@Chris Seveney

So, once reno is complete and appraisal done, get a loan on the building and depending on the LTV the bank cuts me a check for around 80% or so?
and I guess I don’t have to pay taxes on the building till I sell. 

I have a commercial building that I bought for 800k last December. Currently doing a renovation on it. Reno will be about 650k. So, after I’m all done I will have 1.450m into it. Just got half the building leased and other side will be leased soon. I will be about at 220k Noi nnn once the other side is leased. Thinking of taking on bank debt instead of 1031. Don’t really want to sell. I wouldn’t have to pay taxes on the bank $ would I? How does all of this work on the back end? Usually I take a loan at the beginning so not familiar with it. 

@Ronald Rohde

Well, just waiting for seller to accept my offer. They are wanting 3.95m and I offered 3.8m. The deal would still pencil at 3.95m but I really don’t want to pay that. I at least want to feel like I’m getting a deal. As for leasing, I feel comfortable in that area market to get $14/sf. It wouldn’t get leased right away, but at least I have a 6 month leaseback paying $14/sf to buy me some time. And I may just try to extend the building. It’s possible, but I’m sure the city would make it more difficult than it has to be. They always do. 

@Trevor Finn yes, numbers look just about on point. Looks like you have done this a few times. :)

@Ronald Rohde yes, I can get a 5.75 -6% with my local bank. I use them for most everything. They will do a 75% LTV. And yes, biggest risk is letting it sit for 12 months. But, I can still pay the note even if it sits empty after the sale leaseback.

@Gino Barbaro going in cap rate will be 8.5%. After I add the outdoor storage lot I would be around 9.5%. It wouldn’t cost much of anything for my guys to grade gravel and fence the lot. What I really want to do is add 15k sf to the existing warehouse. I normally just do new construction on these pemb, so I have never done an actual modification of an existing pemb to increase the square feet. It’s more risk because no way I could have it leased before my 6 month leaseback is expired. But if I went that route I would add 15k sf to the existing warehouse, making it a total of 38k sf with office/warehouse. I would then try to find an owner/user that would want to buy it at around $225/sf. That’s the long “hail Mary” scenario. It’s a long shot, but if I did so I would have a cost basis of around 5.1m and sell for 8.5m. Take proceeds and 1031. 

My easiest and safest bet would be to just build the outside storage lot. I can easily do this while my leaseback tenant is still in the building. I would have the storage lot completed and have 6 months to find a new tenant. I would shoot for 368k NOI nnn on the new tenant. Would most likely hold long term in this scenario and refi if it made sense.
   

What’s the zoning? If allowed by the city, grade gravel and fence it and then lease it as outdoor storage. 

23k warehouse on 3.9 acres in one of middle TN fastest growing cities. 1 mile from major interstate. 

Purchase price: $3,800,000.  Due Diligence: 90 days   Close: 30 days   Earnest money: 1%
Sale lease back that will take effect at closing. $26,800 a month for 6 months NNN.

I can easily grade, gravel, and fence off the rear 2 acres for outside storage that would easily bring in an extra 4k a month. Or, even better, add about 15k sf to the existing warehouse. The existing warehouse would rent for $14/sf nnn. 

Let's look at the worst case scenario. $14/sf nnn on 23k sf warehouse plus the added lay down yard = $362,000 NOI annually

Cost of the yard will only be around 100k. So, all in @ 3,900,000. 

$3,900,000 with 25% cash down, that I would provide without any other investors. Bank loan of $2,925,000 at 5.75% with 25 year am. 

Annual P&I would be $220,812. Annual NOI would be $362,000. Annual passive at $141,188

Thoughts?

@Ronald Rohde

Yep, I would be adding the same thickness of slab and only extending the portion of the warehouse only, not any office etc.