All Forum Posts by: Jason Turgeon

I'm interested! I thought I was on the list but I haven't gotten any notices. 

I don't have any advice but I would love to follow along if you want to post info as you build this out. I've been daydreaming about building something a little smaller, maybe 4-8 contractor bays.

Depending on your state and electric utility, there may be some really good incentives for you to upgrade to LED lights. They'll save energy and money, you'll get a building upgrade that makes your space more valuable, and the utility will pay for most of it. Plus, you'll never have to deal with fluorescent ballasts again. Look here to see if your utility offers anything: https://www.birddogdistributin... 

@Andrew Tripp and @Jim Kittridge thanks! Seems pretty straightforward from the outside, except I don't really have a solid sense of what rents I can realistically expect and what improvements will cost since I have never done any of these kinds of things. Doesn't seem hard conceptually to learn by doing like I did with residential, just higher risk since the dollar amounts are larger and it's harder to pull the ripcord and sell quickly if I get in a bind. 

Andrew, I'd be happy to chat offline if you want to schedule something. PM me your contact info if you're up to it.

Here in Boston, we have a fair number of older warehouse/light industrial spaces in the 5000 - 25,000 sf range. They tend to be in sort of gritty neighborhoods, not necessarily unsafe but not super appealing to retail business or banks or high end offices. And they tend to have fairly limited parking, since we're in a dense urban area. I see these regularly on loopnet (I know, I know, but there aren't great places to look for commercial deals late at night with a beer).

Here are couple of examples, chosen more or less at random: 

https://www.loopnet.com/Listin...

https://www.loopnet.com/Listin...

These are intriguing to me. I don't want to get into the development game, tearing down old buildings and building new ones. Way too hard in Boston. But I have been thinking that maybe there's a way to get some of these and do some value add to them to make them more attractive to tenants and get a higher rent, thus boosting my equity. BRRRR, but not for residential.

I have a pretty good handle on what improvements add value to a residential property and how much those will cost. But I am less sure of what prospective tenants in this type of space want and how much to budget for those improvements. 

So what are your favorite ways to increase the value/rents of this kind of small class C space? I can't fix the locations or add parking. But I can paint exteriors, dress up the landscaping, restripe the parking area, upgrade electrical and lighting and HVAC, add or subtract windows and doors, put down epoxy flooring, freshen up tired office spaces and restrooms, etc. However, I only want to do this if it will pay off in higher rents. 

In your experience, does any of this stuff make a difference? Is there some thing or set of things that tenants really want in this kind of space?

Price seems high to me. Before vacancies and maintenance and other expenses you already down to about $88k net after financing, taxes, and insurance, assuming 20% down and 4.25% with a 25 year amortization. There are easier ways to make $88k than running a liquor store and being an onsite property manager. 

Look at it this way. If you sold off the license/business and rented the store to a 3rd party, how much would you get from the sale of the store/license and how much would you get from the liquor store rental? I figure you'd get maybe $300k for the license, established business, inventory, etc. So that leaves you with a $1.6M property ($1.9 - $0.3). Assuming the liquor store would generate the same rent as the restaurant, you would barely break even before maintenance and vacancy ($45k liquor store, $45k restaurant, $18k nail salon, $25k apartment = $133k gross). Not exactly a great investment unless you are planning to do something else with the building.

As for the building, the usual due diligence. Age of systems and major components, upcoming repairs, any zoning/legal/environmental issues, years left on the leases, reason for selling, surrounding area and potential to find new tenants at same/better rents, lease terms (who pays for repairs, taxes, etc.) etc. And then layer on top of that any issues with the businesses or rental unit due to covid. Take out food is probably safe, but be sure. Nail salon may be in trouble, fewer people getting their nails done these days. On the flip side, Airbnb is booming due to the pandemic, you may be able to do OK with a STR if the location is good.

I'm interested. 

I'd just walk. The owner is clearly not dealing in good faith and once you get lawyers involved it's going to be hard to keep this thing moving, plus you will start having to pay their hourly rates. Nothing but headaches in front of you. Tell him the deal is off and you want your deposits back and go find a property that works for you.

@Henry Clark, thanks for sending those address. I've never done SBA financing, will look into it. I have a decent local bank but they still want 25%+ down and have a pretty tight geographic area they will lend in. I'm about 6 hours from Philly, but I'll check out those NJ addresses just for fun. Land is way cheaper in and around Philly, still lots of old industrial buildings you can pick up cheap. I just don't want to live down there. From Boston you can go 90 minutes west or north and get land cheap enough for contractor bays, but I want to do something closer to home so I can actually use it. 3 hour roundtrip to my own shop isn't appealing. But with those kinds of returns I would consider developing something out there. 

A teak farm sounds interesting. I tried to buy teak to make a porch swing as a winter project. Couldn't find it anywhere in or around Boston. I used to work on yachts in the 90s and even back then we were talking about there being a shortage of teak. Would love to hear the economics of it. 

I could make you a big iguana but it would be way cheaper to find a local guy down in Belize to do it. But if you want to talk design specs I can toss it around with you. 

@Henry Clark thanks for putting so much detail into these posts. I learn a lot from reading them. I would love to develop something like this, but east coast land availability, zoning, and prices make it prohibitive. But even with your low land prices, I'm amazed that you did all this with only $200k into it. That's about how much cash I have to play with right now, would love to think that I could turn it into something as big as what you're doing.

One reason I want to get into this kind of space is that I make stupid big art. Last piece I made I had to go from Boston all the way to Philadelphia to find a place to finish the project. Me and the gang work in metal. We know how to keep the outside of a place clean. I say let the welders play, just be strict with them about not having the place turn into a junkyard.

Having worked in all kinds of shops, I can absolutely 100% say you need private bathrooms in each unit. Slop sinks, too. And in some cases, provisions for emergency eyewash or emergency pull chain showers. Shared bathrooms will get nasty in a hurry and no one will want to use them. Do you really want to have to pay a maid to come in daily and clean contractor bathrooms? Just make sure you make everyone sign some airtight documents about what they're allowed to dump down the sink drains and that they know if they break the rules the legal liability rests with them. Just stub in plumbing and drains on one wall in each unit and let the tenants decide what they want. Some may want two toilets, or his/hers bathrooms, or a shower, or laundry. Make it easy for them. PEX and PVC are cheap, this is no place to cut corners. 

As for electric, more is better. Especially since we are coming to a future where people will soon need to be charging electric cars at their workplaces. Minimum of 200 amps to each unit, 400 might be nice to offer, if you can do 3 phase 120/240 that will be better, separate panel and meter for each unit is a necessity. Yes this adds up. Yes, it will pay for itself. You will get a higher rent and have a bigger tenant pool if you offer enough electricity for people to run all their tools. And with all electric F150s, Hummers, and Tesla Trucks coming to market in a year or two, you want to be ready for people to be charging those at their workplace. 

For insulation, it is time to see the writing on the wall. Energy efficiency is going to be a big deal going forward. Do more than the bare minimum. It will save your tenants money on their electric heat and AC, it will keep the noise between units down, and it will keep the units more comfortable. All of which equals higher tenant satisfaction, higher rents, and lower turnover. I work with a wastewater utility up in Maine that keeps a chemical storage garage heated to 50 degrees all winter long with no fuel cost. They super insulated the walls, put radiant heat in the slab, bought an extra insulated garage door, and stuck two black solar thermal panels on the roof. Sun hits the panels, glycol gets hot and goes to a storage tank inside, then into the radiant floors. No boiler, no furnace, no cost for heat since they built the building 17 years ago. In Maine. It can be done. It's just a cinderblock building with lots of extra insulation, doesn't look any different than any other new garage. Extra costs for insulation are offset by reduced costs for HVAC equipment and ductwork. 

Not sure about driveway widths but 50' sounds tight. My sprinter is over 20' long and doesn't turn well. A lot of these guys will be driving 4 door pickups with utility trailers. Make life easy for them. 

For lights, see if your electric utility has any incentive programs to get you rebates. LEDs are great, but they leave dark spots if you don't have enough of them. Nice to have them on multiple banks so you can either go full brightness or just 1/2 bright if needed. And everyone likes natural light, so if there is a way to incorporate a big picture window into the front of each unit or put in some solar tubes or something, it will be a nice touch. 

Lease terms seem short to me. This isn't self-storage or residential. I would want 3-5 years, but you can experiment.