All Forum Posts by: Michael Willis

Hi All, looking for some feedback on my potential first office building purchase. 

The Property: 

1) is 100% occupied with about 15 tenants (of all sorts) 

2) has a cap rate at about 8.0% at last ask. 

3) is 3 stories is in what I consider to be a good location 

4) has an elevator and 40+ parking spots is more than 15k sq ft but less than 20k sq ft. 

Background: 

5) a large vacancy (reportedly 2200 sq ft.) last year, (which is now filled) prompted seller to list property for sale but with no takers. 

6) since then seller has filled the space. 

7) seller has owned it for 10 yrs possibly buying at the height of the market. 

8) seller has made some exterior cosmetic and mechanical improvements in that time. 

Target price: 

9) no more than 2.5m w/a cap rate of 8.96% (less is better of course) 

10) 5 year leases in place with gross rent with with 3% annual increases, no cam included

Question:  (a) What if anything should I be mindful of in this purchase particular to an office building?

(b) At a cap rate of 8.0 or higher for an occupied office building in a good area, whats the downside may not be seeing? 

(c) General Feedback on investing in office vs residential pros and cons in this scenario? 

- keep in mind its almost impossible right now to find residential with caps above 6 in my area worth buying

Thanks to all! 

Hi Jessica, thanks for the reply. If I buy I will be self managing. There are about 15 tenants in 16,500 Sq ft. There is a 45 spot parking lot. My understanding is the current owner just charges gross and doesn’t do cam.

Hi all, I am looking into buying a 16,500 sq ft occupied office building.  This would be my first office building holding. The listing doesn't provide a management fee. What is the typical/expected management fee for an office building of this size?  Are there any programs you can recommend which will automate most everything?  I know there are many but finding the best one for this application could save alot of expenses

Hi all, I am attempting a 1031. The owner wants 3m and I’m offering 2m with up to the full proceeds of my sale (aprox 750k) as down payment. Owner financing for 1.25m. What’s a good structure for the financing to meet the seller in the middle at 2.5m? I’m thinking 5 yr interest only at 5%? My pitch is that if it’s worth only 2m today but with the interest over X period of time I’m meeting them in the middle, defraying/postponing their taxes all the while acquiring the property at the right price is a win win for all....

In my area in the area of the property it’s a stones throw to NYC with hundreds if not thousands of new apartments going up all around this property. My calculation puts it at a 5.65 cap. That’s sort of standard but if lucky one can make it to 6 or a little more. I concede it barely cash flows without 50% down but it’s one of those purchases that’s for the longer term if not for shorter term cash flow. I concede it bothers me that’s where property is at in my neighborhood but it’s either buy now before the boom or probably not at all.

If one is attempting a 1031 how do you suggest best handling the listing of the sale property? Do you give an exclusive to one broker for a short time (say 30 or 60 days) or offer say a flat 3% to any broker who can bring a qualified buyer in the shortest period of time/first? What has worked for other investors best?

I am looking into purchasing a 5 cap multi unit/mix use property. The real play is to find a high quality tenant for the store-front. The other ideas I have is to (1) get cell towers for the building as its taller than the surrounding buildings and has great line-of-site (2) offer signage to either billboard companies for the roof or on the side of the building.

If you have experience or information on courting cell companies, billboard companies and what they may add to the property bottom-line, please chime in! 

If one is attempting a 1031 with Bank financing for the purchase, how do banks treat the fact that the proceeds of sale A may be used almost immediately for the purchase of sale B? My understanding is that under normal circumstances banks want the funds in the account for at least 3 months before being used for another purchase, aka “seasoned.”

Hi Frank thanks for that info. There is a restaurant on the first floor. There are at least 2 commercial store fronts street side. But whatever the insurance is should be accurately accounted for in the cap and obviously to be verified. Is there a standard vacancy allowance for office space that’s higher/different than when considering residential that I should calculate?

Hi all, I am the holder of residential real estate in JErsey City NJ. The entire city has seemed to go so expensive it’s almost impossible to find cash flowing residential props with any financing component. Caps are hovering around 3.5-5%. Thus, I am looking into other options. I have come across a class C office building in a nearby city center, with parking. It’s 14k Sq ft, has an elevator, is has off street parking, is occupied by a mishmash of tenants, and is marketed to have about a 7.8 cap at ask and is walking to the county courthouse. The office building needs cosmetic work, which might be a value add play to raise rents, but is otherwise seemingly modern. What are my reasons to jump from residential to office? What are the pitfalls? How will I find office different or better to residential? One of my biggest concerns is to go from an ultra hot market to a less so and different one.