All Forum Posts by: Melissa Kirk

I'm considering purchasing a commercial office building that has 4 suites.  My own business currently leases one of the spaces.  I would like to then convert it into a commercial condo. I know I would need to establish an association with declaration, condo docs and such, get city approval and have a surveyor involved.  Once everything is completely set up, I would be interested in selling two of the suites, while keeping the other two. One to continue my business out of, and the other to retain for cash flow. 

Here are the numbers:  Purchase price to be between $500,000-$530,000.  I would make the purchase with a 1031 exchange, putting approx. $220,000 down, financing 8% on 20 years, payment of $2,593.  The building currently produces $5,300 a month gross and is fully leased. 

Does anyone have experience doing this?  I'm curious how capital gains would work with having rolled in a previous gain and then selling two suites while keeping the other two.  

If it matters to the conversation: I'm planning to sell my STR in Wisconsin Dells soon and roll that gain into this commercial building. Thank you to anyone who takes the time to respond.

Similar to other responces, I also like to schedule an open house for a few hours.  The amount of no shows prevents me from wanting to schedule individual appointments.  I will do it from time to time but I let the potential tenant know "I'm taking time away from my family to show this property...if something happens I need to receive a call or text to cancel". If they still no-show, I put their name on my "never to rent" list.

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $180,000
Cash invested: $51,000

This was a 3 unit we purchased for the purpose of Short term rentals in Wisconsin Dells. There was a main house of 3 bedrooms 1 bath, a detached garage and then a structure in the back that had two small J1 Visa type housing units. We originally planned to renovate the two units but have decided to demo the building as they need too much work. Instead, we just completed the renovation on the main house and will do an ADU conversion on the garage into a small studio.

What made you interested in investing in this type of deal?

We already had two short term rentals in a nearby town. We knew it would rent more in the Dells. We loved the idea of a multi-unit in this location

How did you find this deal and how did you negotiate it?

It was in the MLS. As a broker in a very strong market, I knew our numbers would work even at a much higher price. There were multiple offers and we used an escalation clause. I included a threshold on the inspection as well. We settled $5,000 over list price.

How did you finance this deal?

Used a commercial loan with 20% down. We plan to have the property paid off in less than 2.5 years.

How did you add value to the deal?

We did a full renovation to the main house. The additional two units in the back will be demolished soon. The garage conversion to an ADU will start in the spring of 2023 so we'll have two units available for rent. If we are lucky, the City may allow us to add a Boxable to the back of the property for a 3rd STR. We are currently in discussions with the City.

What was the outcome?

Fantastic purchase! Cash flow varies between $10K+ a month on busy months to $4K on slower months for the main house so far. This property has not been operating long enough to get an average cash flow monthly.

Lessons learned? Challenges?

We were not super realistic about the condition of the two cabins in the back of the property. They were never intended to be used year round and did not have a proper foundation. We estimated needing to spend $50-$60K to make them usable year round but they would have still been a bit shady...not really in line with what we would be proud of. Luckily, we were happy to pay the price we did for the main house alone so we feel really good about the purchase.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Dan Rindfleisch was our commercial lender at Baraboo State Bank- I highly recommend him and have referred many clients to him for commercial deals. He is great to work with and really on top of his game. And....Me! :) I'm a real estate agent/ broker and can help if someone is looking to buy or sell in this area.

I would not walk away over a slight increase in the rate.  I would however be shopping for a better loan. Three points is crazy...I haven't seen anything more than a point with any client for years, even commercial or vacant land.  Find another lender!

Our cleaners are in charge of restocking those items.  I keep a nice stock of everything in a locked closet at each property and they let me know when the stock room needs to be refilled.  For a mid-term guest, I give them what I call a "starter pack" with several rolls of toilet paper, paper towels, bags of coffee, tea, tiny laundry soap container, etc.  After that, they are purchasing what they need. Not a chance I'm suppling people with toilet paper for months on end!

As minor as the black marks are, I would not replace.  Maybe look into better cleaning product to get it nice and clean.  You may also want to check and make sure the bathroom has proper ventilation.  The vent may be blocked or the fan may not be working properly. 

Blinds are horrible in a rental because they are just not durable. Replace all of them with inexpensive, white 1 in vinyl blinds at your cost and move on. I’m talking the $15 blinds from Walmart. Plan to replace several between each tenant. The other option is to install a curtain rod with neutral drapes that can be laundered if it’s a nice rental. If it’s a C class, I would not include drapes. 

If you get consumed by such a small item, being a landlord will be very difficult. 

I've made many mistakes with my STRs.  The largest I made was choosing a property as a master lease that did not have adequate duct work to the second floor.  When the heat of summer hit, the central air did nothing to keep the upstairs cool and it resulted in poor reviews.  I ran and bought three window A/C units, however the electrical outlets were in poor positions so extension cords were everywhere.  All around, I should have been more diligent on checking these things. 

There are several mistakes I see the other hosts doing in any location... 

1. Don't take your own pictures.  Hire a professional photographer!  

2. Don't have the spaces entirely sparse, or too packed with items. It won't rent well if it looks like it's all cast-off old furniture.  Let the place have some design and fun. 

3. Don't go bare bones, especially in the kitchen...Seriously, one of the constant top raves about my STRs is that the kitchen is completely stocked. Don't go cheap here. Provide things like colanders, mixing bowls, spices, salt/pepper, napkins, knife set, cutting boards, measure cups, spoons, blender, wine glasses, wine opener, pizza cutter, etc. Include a basket with coffee, tea, sugar and creamer. Attention to detail gets lots of attention. 

Another person mentioned it and I agree completely. Spend the night in your own STR. You will discover the areas that need improvement.

Hi Marcus, I have three Airbnbs in Portage which is 25 minutes from the Dells.  The vast majority of my guests are overflow from the Dells in the summer months.  I also rent very well in the winter due to being close to Cascade, a ski hill.  Feel free to reach out and connect and we can talk further.