All Forum Posts by: Jason Turgeon

I'm with you on this having to be close to the peak. I am planning on putting my 2-family rental on the market in a couple of months - bought it in 2008 and am hoping to pull out some equity, pay down some debt, and reinvest somewhere an hour or two out of town. I've already seen some softening in the market compared to the absolute feeding frenzy of last year, but prices are still high.

Bigger question is whether we should sell the other 2-family...the one we live in. I love this house, but we will need something bigger eventually. But selling at the peak means we will also be shopping for a replacement house at the peak.

Interesting. That would likely explain part of this guy's motivation to sell. He had it listed from 2011-3 without a buyer (very different market back then), so he may well have picked up another 7 year mortgage which would be expiring in about a year. And since I know he is 74 and ready to retire, I can see him not wanting to go in for another 7 years.

I'd seen escalation clauses in commercial leases, just never knew why they were so common. Really appreciate your insight on happy, stable tenants being a liability. In my residential units, my game plan has been always to get great tenants who are happy and stable, then undercharge them by about 5% so they never leave.

"A good office leasing broker"...I am a licensed agent, but I have only ever done residential deals. This is a good chance for me to step up my game and learn about commercial leasing. I am definitely NOT a good office leasing broker at the moment! I'll work my network a little and see if any friends of friends do office/commercial work down there.

Thanks, @Tim Milazzo. That's helpful info. 

I try to work exclusively with small local banks anyway, so that is not an issue, only problem is my preferred local lender doesn't cover that part of the state so I need to start with someone new. 

I will definitely check into the lease expirations, if the selling agent ever gets back to me. Hopefully his delay doesn't mean they are completing a deal with another buyer, but if they do at least I learned something about commercial financing. 

He has 10 units and 7 rented. He has his own offices that he is closing down as part of his retirement. I am not sure if he is using all 3 of the remaining offices or if there is some true vacancy. This is a very busy commercial strip with lots of new development, mostly big box stores and national chains, so I am optimistic that there will continue to be people wanting office or similar space here. 

I think I can still make this deal work at 30-35% down.

My only real concern from all this is the short 5 or 7 year term of commercial financing. Does this mean I have to refinance or think about selling every 5-7 years? Is that really how the entire industry works? Seems odd. Rates could be dramatically higher in 5 years, but my leases could lock me in to lower rents, cratering my cash flow. Is there some workaround to get stability for longer mortgage terms?

Thanks, Ann. I didn't realize you were hard money, just saw "lender" under your name. I agree, this isn't a good candidate for hard money. 

Charlie, I am also an agent. I saw those earlier listings when I did.my initial research. I think the seller just wants to unload it, from what I could dig up he's 74 years old and ready to retire. The fact that it cash flows this well with effectively 30% vacancy since he is using space for himself is what interests me. Ideally I can get the extra space he's using rented out, too. But I never trust anything that seems too good to be true, which is why I am here looking for stuff I missed. 

Seems like this might be a legitimately decent deal. I am going to set up a showing and contact some lenders. Shouldn't be hard to unload my 2 family, but he would have to be willing to wait. 

Thanks all,

@Charlie 

@Charlie MacPherson, I'm not too worried about crime. It's in Wareham near the bridge.  The building is probably about 30 years old by the looks of things. 

Tenants are a mix, but at 1000 sf per units, this is more office space than retail. There are a couple of trades companies, a mortgage company, a consignment shop, a computer repair/services place, etc. Might be suitable for other things like massage/physical therapy, yoga/dance, etc. Good point about going back as far as possible looking for late payments.

@Ann Bellamy Thanks for all the helpful tips. I'll check with my usual attorney and lenders for more details on closing costs, rates, etc., when everyone is open again tomorrow. Per the listing, every space is on its own electric and gas meter and it's on city water/sewer.  I am worried about flood insurance, that will likely be a big cost. From some digging, it seems that the owner is 74 years old and wants to retire. He listed it at $1M a few years ago and got no bites, then dropped the price without luck. Since then he has done some upgrades and raised rents a bit. If you do lending on this kind of property, I'd be happy to talk to you.

@Ronald Rohde Marketing for commercial tenants does concern me a bit. It's a very high traffic spot, though - good for drawing people in, and a good spot for a big sign. I am also a licensed agent/realtor so I can work the MLS. I will continue to self-manage.

Hi everyone, first real post here. I'll get around to a proper intro in the appropriate forum and adding some profile info sooner or later.

I have a 2-family rental in Boston that has appreciated considerably since we bought it but rents haven't kept up. I'm currently sitting on about $250-300k in equity but only netting about $11k a year on the rents. I want more cash monthly to get me towards my goal of quitting my day job, and I lived in this property until 2 years ago so I can benefit by pulling out some equity without paying capital gains if I sell now. So I will have about $125k for the 1031 exchange and another $125k in free cash that I can either use to pay down private debt (student loans, HELOC on my personal residence, etc.) to decrease expenses or put into another income property.

Found a 10-unit office building about an hour south from me on the MLS. They're asking $500k. Here's the pertinent listing info:

I figure I can put 25% down ($125k) on a 25-year mortgage at roughly 5%. Property taxes are about $8k. That puts my P&I at at about $2200/month, taxes at about $670/month. Taking a guess at insurance, maybe 1% of the value or about $400/month?  If he's generating $7k now and will have 3 extra units available for rent, these seem like very compelling numbers. He's cash flowing like crazy and it's 30% vacant now. There aren't that many things to spend money on...no lobby, no elevator, no staff, minimal plumbing, minimal common utilities, new roof, pics don't show any obvious repairs needed.

The numbers are almost *too* compelling...am I missing something obvious? Are there some extra costs to commercial real estate that I am not taking into account? What are the ways I could fail miserably here that I'm not seeing?

I contacted the listing agent a couple of days ago asking for full financials and he replied but didn't send them yet. Since I haven't even put my place on the market (I could sell it off-market pretty quickly to some investors I know), I am not quite ready to push him for more info.

Any help you all can give me to decide whether or not to pursue this would be appreciated.

Thanks!

I'm a realtor. You don't need us, we just make life easier (often, much easier). But if you and the owner can come to an agreement without either of you paying a commission, go right ahead. The specific rules of real estate transactions vary widely between states, so do some research specific to NC about what info needs to be in your offer, what happens after you have the offer accepted, timelines, etc. 

You will still want to hire an inspector, figure out financing, and have some kind of firm do transaction management/title work for you. Often, a buyer's agent will help you with all those things, but there's nothing that says you can't find your own people for those jobs. I live and work in Mass., where things are different from most other states regarding real estate transactions, so I can't give you specifics. But this website has a handy list of things (see step 6).