All Forum Posts by: Jade S.

Agree with Sergey...the checks to mitigate the issue could potentially be large depending on the prior business types that led to this current state.  You will need to run a cost analysis and have a discussion with the seller to understand if the asset is still worth pursuing given the potential cost of contamination mitigation.  Good luck with next steps on this.

Quote from @Paul Smythe:

@Chris Seveney great point and that seems to be pretty much a nationwide trend from what I've seen. Suburban office is definitely looking better than downtown currently.

Our LLC has a two-story suburban office asset with spaces in the 650 - 1300 sq foot range in the Upstate of SC, and it has held firm throughout COVID with three tenants renewing over the past 10 months with no missed rents. However, we have opened up to fairly flexible lease terms (e.g. shorter lease lengths, etc) as it seems tenants generally want that flexibility. But I also know it takes less time to fill the smaller spaces.

I have gotten feedback from my commercial broker that downtown Greenville has had big tenants leave some of those larger buildings, which I suspect may remain empty for some time to come.

Another question...exactly what KIND of commercial property type are you seeking? More of a STNL type NNN investment, or a 5-6 tenant retail storefront situation? Or a multi-family asset? So many flavors to consider. And as others have stated, do the proper analytics to derive your potential offer numbers.

@Justin Mathews Just curious...how old is the roof and what type of roof installation were you quoted? Also, is the roof significantly degraded to the point you have multiple leaks? No doubt the costs of new roofs on an industrial asset can be quite expensive. My LLC owns two flex industrial assets in 10,000 - 12,500 sq ft range, and I also need to plan for future roof replacement on one of those in the next 3-5 years. We've had to track down occasional leaks thus far to get areas resealed to prevent further issues, but the age of the roof is getting up there.

Good luck finding a good regional or national credit tenant to go into the space on a NNN lease. Once things are set up, they can really hum along nicely!

We had a similar scenario with the last flex industrial property our LLC acquired off-market last summer. It was a sale-leaseback situation and we negotiated a NN lease with the seller for one of the two demised spaces they already occupied (half the rentable square footage). There was another tenant already occupying the other half of the building who had a lease expiring within 2 months post-acquisition, so I worked with my broker to help negotiate a new NN lease with that tenant as well during the due diligence period. My bank underwriting the commercial loan came along with this process just fine, although I had an established relationship with them.

Multi-tenant Flex Industrial under 40,000 sq feet! Can’t find much product in these hot Southeast markets easily, and they stay rented out.  We have had tenants recently contacting us 8-12 months before lease expiration inquiring about extensions...brings a nice level of certainty for sure.  

Quote from @Charles D. Smith:

1. Whether you’re buying an apartment building, shopping center, or commercial office building, it’s wise to make sure you know what is in your leases. Details can get missed in a seller or broker’s offering materials. Through a review of the tenant leases, you may learn that certain tenants have lease termination options Maybe it was your impression that any HVAC repairs were handled by the tenant only to learn that the Landlord is in fact responsible. On the flip side, you may learn that tenants should be reimbursed for more expenses than the current landlord is collecting which when corrected could allow a new owner to instantly increase the property’s net operating income and value.

This...all day long.  In the 2017 acquisition of a commercial office building with four business tenants by my LLC, one of the leases gave an existing tenant the first right of refusal at the purchase price we had negotiated and the listing broker had not noted that previously.  We had gotten the property under contract at a great purchase price as it had been overpriced initially (due to way under-market rents) and had sat on the market for quite a while.  It took a few days to sweat that one out as the tenant finally declined to exercise that clause.

Quote from @Don Konipol:

Most Profitable Note Deal - bought note secured by restaurant/bar facility with unpaid balance of $575,000 for $312,500, collected 20 months interest at 9.5%, and then received fulll payoff of $575,000

Most Profitable Real Property Deal - purchased auto repair facility with environmental issue from bankruptcy court for $115,000; resolved environmental issue for less than $2,500 and sold property eight months later for $297,000

Worst Note Deal - originated loan of $650,000 secured by RV/STR property in oil shale country with appraisal of $2,000,000. After oil prices crash, shale operation shut down, borrower defaults and we foreclose. Eventually sold the property for $450,000 net.

Worst Real Property Deal - purchased old car dealership facility at foreclosure auction for $275,000.  After two years of not being able to secure any tenant(s), Sold the property for $250,000.  Lost $25,000 on resale, spent $52,000 on property taxes, $9,000 on insurance, $2,500 on security, $18,000 maintenance and repairs, and $7500 brokerage commission, for total loss of S114,000.

 Don, just curious...what killed you on that old car dealership facility with the place remaining dark for two years? I assume you had a lot of prospective tenants who “kicked the tires”...just wondered why they passed.

Hey Bart,

"Reformed" Former SFH investor here...I have been on the commercial real estate investor side now for several years in GA and SC. I own two flex industrial buildings that make up a total of 20,500 sq feet, both acquired off market. NNN and NN leases for the four tenants in the two buildings (2 tenants per building). Has been a great area for investment, and the cash flow has been consistent. I also continue to hunt for additional investment opportunities as well, although that is challenging in the hot markets here in the Southeast.

Quote from @Jason J.:

If you had to make a decision in the current market, would you take 3% with 7yr balloon or 2.75% with 5 yr balloon? On a 20 yr amortization. What is your reasoning?

I’ve stuck with the longer term more recently.  My hold time expected to be 7+ years, and the risk of interest rates being higher at 5 years helped me make that decision.  And any pre-payment penalties will burn off before year 5 in any event.