All Forum Posts by: Lee I.

I'm not sure that it will have a direct effect on the value of your property since commercial property is all about how much income the individual property is producing.  The other factor comes into play as far as it can give you a general idea about what is happening to the area overall.  Why was it auctioned?  Was it foreclosed on, did the owner die, etc.?  If it was foreclosed on, why wasn't the owner able to make payments?  Has the plaza been losing tenants and been unable to refill?  Since being sold last year, have the new owners been turning the place around or has it been getting worse?  In general, is this area gaining or losing population, increasing or decreasing average household income, crime rate, etc.?

But again, that's all secondary to what your property is doing.  You can still make money in an area that others are losing in.  You're in a good position in that you know exactly how your business is doing and you probably have an idea of how things look going forward.  Are you planning to keep the property, sell the business, and just landlord; or will you sell the business and land together?  If landlord, do you feel your business has good projections going forward and do you feel confident that the buyer will be able to run it at least as well as you were since you will be relying on him for half of your income?  Does the lease on the restaurant allow the landlord to see their financials?  As part of your due diligence, you will want to see how they are doing.  The restaurant has been there 12 years, but have sales been dropping the last two?  Hopefully they are still doing well and maybe even increasing sales.

As @Howard Abell said, talk to a CPA (look for one with real estate and business experience, ideally with other clients that are gas station owners) and get an idea of how much you will be paying per month for this property vs what you are currently paying in rent.  If you are paying less in mortgage than in rent, in my mind that's a strong reason to buy because you are in a great position even if you don't end up selling the business.  

You want to look at the total income ($72,000) minus the expenses, then divide that by the purchase price to get your cap rate.  Determine if that is an acceptable cap rate to you and see how it compares to the area.  Of course as a owner-operator, you will have other considerations, such as never worrying about rent increases or losing your lease, etc.  There might even be some tax benefits.  Is "700-750K with a 20% down @ 20 years" owner financing?  At what interest rate and is it fully amortized? I saw in another post that you were selling your business.  Is this still the case?

@Joe Cummings, any updates?  Really curious to hear how this turns out.

Welcome Debbie.  Do you have or are you pursuing your real estate license?  If not, be sure to real up about wholesaling and the law in Ohio.  Best of luck.

Welcome Federico, best of luck in the Cleveland market.

Welcome James.  I'm also interested in smaller commercial properties.  Feel free to message me any time to chat or share knowledge.

I think you're just trying to talk yourself into buying something you want :-)  I have to agree with the above that you probably won't make money off of it.  It would take too many plays with too few players and they can be very expensive to repair.  Also that particular arcade, having specialized parts (pedals and wheels), will be harder than average to replace parts for.  If you can afford to treat yourself, I say buy it, but don't do so with the idea that it will be profitable.  Keep us updated though, I would love to be wrong!

To me, it depends on how much time you have and how many other leads you are pursuing.  Do you have time for some back and forth?  If so, try to get more info.  Worse thing that happens is maybe you learn something from trying to understand his financials.  Feel him out a bit and if he's committed to a price that is unreasonable, just say something like "I just can't make the numbers work for me at this price.  If you decide to lower your asking price in the future, please get in touch with me."

This is actually some of the best advice you will find on this (or any) site ;-)

Welcome Shon