All Forum Posts by: Scot Burns

 Thanksf or the reply Russel, I understand your position, but do you feel valuation should be merely placed on all the brand new leases, which expire anywhere from 4-10 months from now, or a bit more on what the place has historically rented for?

TLDR - does it make a difference to you if a commercial property is being offered at a multiple when all of it's leases are less than a year old and only for a year and previously rents were 50% lower.

I'm looking at a property (industrial warehouse) that has about 23,000sf of rentable space. Rent was about $0.85 for years, and it seems that in order to sell, they have just recently signed all 20 tenants up with 6-mo. to 1-yr leases at $1.25. This has obviously inflated the gross, profit, and cap rate by a bunch. 

How do you feel about paying the new "market rate" for the property vs. something that is more reflective of where it was. Do I just need to get over the "money grab" feeling and accept that I'm buying at what it should sell for, OR, am I justified in not feeling very good about the history of the new rents that are drastically higher than they were before and fear that some tenants might not be able to handle the higher rents especially with a recession on the horizon? 

I know in mobile Home Parks (which I'm much more familiar with), this sort of turnaround happens all the time. A person buys a mis-managed park, cleans it up, raises rents, and the park goes from a $500K purchase to being sold for $1.2M 2 years later. But those are people living in homes, not just small businesses that can pick up and move across town a lot easier. 

Thoughts?

Thank you everyone for the very helpful suggestions. I ended up not getting the house, but I did learn a lot in the process.

Thanks for all the answers. I will, of course, be talking to my real estate attorney Monday, just thought I'd try to get some answers over the weekend so I could stop looping this in my brain all day long... 

Scenario: You buy a house after it there was a death in it due to accidental fentanyl exposure. You get the house remediated by a hazmat service and the city gives it an "all-clear". You remodel the house and sell it. At some point down the line, one of the occupants is exposed to fentanyl (maybe through doing demo work) and dies. 

Question: For how long does the seller of the rehab house have liability for anything happening to a person in the house caused by drug exposure?

Did you find the property via the NMLS (for mortgages) or the MLS (for properties for sale)?

And the challenge with B&H is most properties won't cash flow without a significant down payment. Forget about 20% down. You need big money or patient money. Best of luck. 

Hi Stephen - If you've got the money, I'd recommend a B&H strategy for a couple reasons. The market is really small and there are a LOT of people trying to flip. Not just professionals, but realtors, contractors, and people who have been influenced by TV shows. It's a crowded market. 

However, SLO has a lot going for it (e.g. Happiest Place on Earth, a coastal town, a college town, wineries, etc.) and while I do think we are at the peak, once/if we take another dip, things will continue to rise and more and more Gen X and baby boomers try to retire here. If you live hear and have traveled, then you know its a special place. 

JMHO - hope it helps.

Thank you all for the replies. I work in the internet marketing field so I'm very familiar with all of the non-turnkey options. I just wanted to see what is out there. I believe different locations and demo's have different marketing approaches. I will addres these with a multi-pronged approach. Thanks again. 

I'm looking for a turnkey website solution to help promote my business. I saw what I thought to be a turnkey website solution for just this advertised on Facebook a while back but can't find it now. I believe the pitch was somethign to the effect of "Forget about yellow letters and bandit signs - everyone will end up doing a web search anyway, why not have a site." And from there I think they might have been selling SEO or SEM services which I can do on my own. 

Any ideas or recommendations?