All Forum Posts by: Taylor Hazard

Unfortunately I just dont know enough about the deal and your market to comment on lease up probabilities etc. Without knowing what is driving the industrial market in OH, how the building is positioned within its submarket, likely tenant pool etc. it would be inappropriate for me to comment on lease up probabilities. 

It sounds like you have all the info you need to make a decision, digest and interpret your agents advice and move forward or back out.

I will say that 12-24 months sounds like a long time to release space regardless of market. Can you cover the carry costs for 2 years? Thats a long time, when is the tenants notification period for renewal (e.g. 120 days)? As the LL you need to be hyper aware of this benchmark, if tenant doesn't renew then start marketing the property for lease IMMEDIATELY. 

Good luck.

Thanks @Will Yee and @Beth L.

While researching methods of easy management of rental applications, rent payments etc. www.turbotenant.com and www.cozy.co have come up as probably two of the most widely used portals. Curious as to BP's opinion on both services; success / horror stories and recommendations for other services encouraged.

Thanks!

PadMapper.com is pretty useful also. 

Agreed with @Alex Lucille. If your ultimate goal is to make RE your profession you should strongly consider your location as it relates to investment criteria. I'm also in Seattle and recently lived in Denver, two cities with exploding real estate values such that it is difficult to find properties that cash flow without looking in the fringe cities such as Everett, Tacoma or even Olympia in Washington or Aurora, Fort Collins, Colorado Springs in Colorado. 

Your current market (Tuscon) will provide far better opportunities from a pure cash flow standpoint but appreciation wont be near what you will experience in the Puget Sound region; i.e. Seattle is probably better from a buy and hold stand point and Tuscon for cashflow / flips. 

Whichever route you choose start by networking into the RE community, I would encourage you to take @Alex Lucille up on his offer to chat. Im also happy to help if you want to reach out.

Good luck!

@Stephanie Z. Congrats on posting, your headed in the right direction and asking a lot of the right questions, BP is full of talented and experienced RE professionals. @Joel Owens and @David Miller both make good points, but I would expand on a couple points.

If you can respond with or PM me some more details a more in depth analysis would be possible; for example where are you located? what is the age/construction type/condition of the building? Do you own the property free and clear or do you have a mortgage? What lease rate is the Buyer proposing? 

You are smart to consult your team, but I would urge you to interview and hire an industrial broker on conjunction with your attorney and CPA. The broker will be able to manage the nuts and bolts of the transaction but more importantly give you invaluable market knowledge that you will use to better understand the financials of the purchase offer. 

For example, have you looked at sale comps and competing properties to understand if the purchase price is fair? Same goes the the proposed lease rate, is it in line with market rents for the area? A broker will help answer these questions and more. They will also advise you that the initial offer is really only a 5 year lease offer, and not 20 as you stated. If the tenant vacates in 5 years, depending on your location, the property might be difficult to re-lease (not to mention the costs associated with finding a new tenants, which can be substantial).

At the most basic level you are talking about making a decision to get out of whatever business your currently in and becoming a landlord. Is that your ultimate goal?

For reference I'm an industrial broker in Seattle and specialize in representing Landlords / Sellers. If you'd like to discuss in more detail feel free to reach out; I can also refer you to one if my Cushman & Wakefield colleagues in your local market if you like.

Hope this helps, good luck!

PMing you now.

I second @Ronald Rohde, its a difficult question to answer without knowing your specific goals (for yourself and the property), risk tolerance and local RE market etc.

Are you trying to decide between opening up your own business in the second unit or is your list of business the potential tenant pool? 

Great topic, thanks for posting.

So what is the actual clear height in the building? I.e. how hi can a tenant stack? if its 16' id run away, if its 24' your probably in good shape but be aware that buildings are getting taller and 24' will be considered outdated in the next 10 years. Block construction is solid (better than metal but not as desirable as concrete tilt), im assuming it was built in the 70's?

The single greatest attribute of the property is your ability to divide into to units. Lease rates and overall square footage in industrial properties are inversely related. I.e. the smaller the space the high price per square foot you can achieve (and thus increase the buildings return). Two tenants also helps you mitigate risk, should one leave you still have 50% of the building occupied which means your carry costs are only 50% of the NNN's and PITI. Two tenants also gives you more negotiating power in a renewal scenario. For example when the current tenant renews in 6 years they know (especially if they are represented) that the path of least resistance for you is to renew them, the threat of vacancy - particularly for a local owner - is daunting and tenants know it.

Again, when it comes to the "long term desirability of industrial buildings in this class" I would trust your broker as the answer is still very much a local one. But in general a 24' clear masonry building in good shape for its age and ability to add value through reverting to multi-tenant would be attractive to me and so long as your comfortable with the tenants credit, your return and ability to release it in 6 years if needed then go for it. 

Regarding price im starting to hear two different stories: first he was unmotivated and doesn't want to sell, and now he wants $$$ to move to CA and start new projects? Also 16% increase over the last 2 years of the hottest industrial market this countries every seen is suspect, after commissions and closing costs he wont clear very much at all. Does he have debt on the property? This makes me think its sat for reasons unrelated to price, but if your comfortable with all the above and its location then tie it up and do your due diligence. 

I agree with everything outlined by Joel.