All Forum Posts by: Matthew John

@Greg Dickerson Thanks for the tips! I will get in touch with a more experienced commercial broker in my area. I did some NOI calculations and after factoring in all the expenses, the NOI was very low.

For NNN lease, isn't it normal for tenant to pay for taxes/insurance and even repairs?

If so, this would certainly boost the NOI and make this more attractive. I guess there's so many variables here that could effect it.

@Jaysen Medhurst Thanks! That's a good idea. I have a broker I'm working with, but he's mostly residential. Problem is, he's a family friend too and I don't want to just go switch brokers. Also feel bad asking other broker's questions when I already have one and I'm not planning on working with them. 

In reality, my agent should know this. I feel like I've been doing all the leg work and he's not willing to submit offer without proof of funds. He doesn't understand that I won't get funds until it's under contract and I have all these numbers sorted.

@Greg Dickerson Thanks for the reply. I think it would be a good idea to go with a contractor and have them write up an estimate for rehab costs + measure the sq ft. 

A lot of comps are NNN lease, but I'm unsure about Cap Rate. It says in the listing 9% and when fully occupied, 16%...but we are looking to refinance once it's stabilized and that will influence the income depending on the mortgage cost.

Replacement cost is a good tip. This is .42acre on a busy, main road. 

I am in the suburbs of Detroit, so property isn't too expensive, but I think it's $150-$250 per sq ft of a new build here on commercial land. 

My broker seemed pretty confident it would be worth 500k+, but he's not an investor or appraiser. 

Do you think a good way to find the value would be NOI/Cap Rate?

@Jaysen Medhurst Thanks for the reply! I've toyed with the Appraisal idea, but if these numbers don't work out them I'm out $2-3k in fees. 

I did some digging on REONOMY.com (non affiliated) and found this record from 2010. Do you think this was his balance in 2010, 316k?

If so, it's been over 8 years now so that should be significantly lower. 

The listing broker said they got a full price offer for a mortgage, but they have contingencies (they want all tenants out). This would mean the seller would likely have to evict the current tenants and I talked to them, they want to stay. 

They countered the previous seller with a cash offer for full price and they haven't accepted it yet. We want to keep the tenants in there and can offer cash, I just want to verify the ARV will be over 500k.

Anyway to suggest this besides paying for Appraisal? 

I also think it's hard to have an Appraiser speculate ARV because they don't know what work we would do it or not. A bottom end rehab and high end rehab could determine the income the tenants pay, so it's hard to guess I think.

Hey guys, 

I'm in the process of evaluating a 4 unit Commercial Medical/Office building. This is a distressed property that is certainly below it's top potential. 

Currently it only has 2/4 units rented and has not had any updates since the 1980s. It was built in 1967. 

The previous owner bought it for $505,000 back in 2006 and it doesn't appear he did much maintenance or management of the building. Right now it's sitting in Pre-Foreclosure and he needs out. Seller seems motivated as he's moving to California, but he's looking for a CASH OFFER ONLY. 

My experience thus far has been only residential, but I came across this property and it looks like it could be a deal. Being that it's a 4 unit and relatively small, I think this would be a great step for me as an investor. 

The problem I'm having is determining the ARV of the property. It's certainly not as easy as residential.

I'm looking to submit a Cash Offer then go over the numbers with my interested Cash Investors & at the local REIA next week.

Listing Price - 299,900

Rehab Estimates - 100,000

Rent Comps - $12/sq ft - $20/sqft (varies a LOT)

Current Income - $2100/m

Offer price - 250k Cash, no higher than 285k

Taxes - ~$7000/yr

Utilities - Tenants Pay

I have comped out similar properties with my agent and we're finding some are SMALLER, but priced higher. Some are BIGGER, but priced lower. 

I understand commercial properties are appraised with the income they are producing, but I'm also having difficulties projecting that. 

On the Brokers listing, he advertises it as "5000 rentable sq ft".

On the municipality website, it says "4508 total sq/ft"

On Reonomy, it says the "Building Area is 3556 sq ft".

These are some significant fluctuations that could definitely impact the ARV of the property and I'm not sure which is accurate.

If order for this deal to 'make sense', the ARV would have to come in over 500k. I know it *could* be worth more than that, because 13 years ago when the owner bought it through a bank loan, it was appraised for 505k.

How do you guys accurately determine the ARV on a Commercial property?

Before I submit an offer and move forward with an inspection, sending a contractor out there to confirm rehab estimates, and tie up this property, I want to make sure it actually could be a deal. 

Thanks! 

@Brian Serina It's certainly interesting! They seem to only give 75% LTV and I don't have 100k liquid to put into this deal.

I’m trying to find more so a private investor that could loan up to 90%, otherwise I have to bring on another cash/equity partner (which I’m not against), but not the first option.

@Tarik Turner This property is estimated at 100k in repairs with a 285k purchase price.

ARV is 550k+ once the property is stabilized.

@Richard Buffet I'm in a similar position as you. 750+ credit, I have cash, but don't show much personal income. 

I've bought residential properties using my cash & credit by bringing on a (credit) partner that shows good credit, good personal income, and good debt to income ratios. 

I am not trying to do a similar strategy with commercial now, just need to have a partner that can help with financing. 

@Richard Buffet I'm in a similar situation. Your best bet is to find a credit partner (someone that has stable W2 income + decent credit). 

I've had to find different credit partners for every deal I've done because my income isn't normal, either. It's certainly not easy, but it IS worth it to own the property! 

@Jeff Caravalho I had this problem too (good problem to have) on a recent rental I listed on FB marketplace!

I put out an Ad to get some 'feelers' and overnight got 70+ messages. I decided to take the Ad down, buy a modem, and call up Comcast for a basic internet. 

I added some value to justify the rent increase & it worked. It's a Duplex so I was able to use the Modem & internet for both units and also added some income to the property. 

My advice would be to take the Ad down and maybe find a way to justify a $100 - $200 rent increase!