All Forum Posts by: Mike Lynch

Hey Guys,

So, If you were in my shoes right this second, and have a large insurance chain franchise wanting to rent out Unit 1, left side of the building, for $1000.00 per month, what would you do right now? ...... Progress forward with it?..... Sell it?...... I have to think of something pretty fast. No papers have been signed as of yet with the insurance company and the other Unit --- ( Unit 2 ), is vacant right now...... I am very confused as to what to do right now.

Thanks,

Mike

Well,

Believe Me! ... If I thought that I could get $320,000 out of it today, I would!

We bought a heavily vandalized home for $118,000 in 2015, then put another $100,000 in it. We sold it for $395,000 in 2016. We would have to pay about $50,000 Capital Gains. We decided to do a 1031. We had the 45 days to identify properties. Due to Hurricane Matthew, destroying and flooding neighborhoods in my area, all of the foreclosures were bought up right before we sold the flipper home. The only thing left was over priced Double Wides and crap homes. Since I operate a plumbing business, I can't travel much. I have to stay around here and do service calls for Realtors all day. Investing long distances would be very difficult. As the 45 days were going by super fast, I found the 2000 sq foot office building. The lady wanted $350,000, then on 6/29/2016 she dropped it to $299,000. On 7/26/2016 she dropped it to $244,900. We made her several offers like $200,000 and $220,000, $230,000.  Finally we offered $235,000 and she took it. The place is really nice.

I didn't use leverage because our Accountant said to burn up the money for the 1031, because we can't just burn up some of it. He said not to sell it for two years, because of the 1031. We have a nationwide insurance company wanting to rent out one side for $1000.00 per month. They will probably want to do a 3 year lease to start. We will still need to rent out the other side. We would definitely do at least 3% rent bumps each year. They are supposed to build a thousand new homes down the road and a lot of building is going on here now. Perhaps after the 3 years, we might sell it? What do you think?

Click the link below then scroll down.

7246 Beach Dr. Sw Shallotte, NC

Hi,

I am trying the 4 square method to analyze a property that I am in the process of renting. We paid $235,000 cash for a 2 unit office building this past summer ( 2017 ) and did a 1031 exchange. Each unit is exactly 1000, sq. ft. each. The rent in my area is around $12.00 per foot or $12,000 per year per unit.

Income --- Rental Income = $2,000.00 ...... ( No laundry, storage, misc, extras )

Total Income = $2,000.00

Expenses

Taxes = $161.00

Insurance = $190.00

Lawn Care $ = 150.00

Vacancy 5% = $100.00

Repairs = $100.00

Capex = $100.00

Total Monthly Expenses = $901.00

Cash Flow = $2,000.00 – Minus Expenses = $1,099.00

Total Monthly Cash Flow = $1099.00

Cash on Cash ROI

Down Payment = $235,000 ( Paid in full all Cash for Property )

Closing Costs = $4,500.00

Rehab = $7,000.00

Misc = $500.00

Total Investment = $247,000

Monthly Cash Flow $1,099.00 x 12 = $13,188

Cash On Cash Return = $13,188 / 247,000 = 5.34%

Hum? ..... Problem is the area here. It is impossible to reach for higher rents. Myrtle Beach, SC and Wilmington, NC can pull twice as much. We are located in the middle in Shallotte, NC.

We Paid $235,000 for the property. According to Keyvon, it is worth $320,000. Tax Value is: $296,000.

What do you think? ( Keep it for a while or sell it after a couple of years? ) The area is growing with lots of homes being built nearby.

Any feedback will be great! ... If I am doing this all wrong, please let me know!

Thanks,

Mike

I meant to post this link, but forgot..... It shows the property.....You can copy and paste it.

https://www.instantstreetview.com/@33.89735,-78.485502,-2.96h,5p,1z

Thanks Robert! ---- Great Info!

Steve McGovern,

Here is Google Street View of the property! It is between two beaches in a very well traveled area. Perhaps I could command a little more, but several nice places are for lease and they want $11.00 to $12.00 a foot. One of them is right across the street. We own the building outright.... We paid cash for it, and a residential property, ( where we will live, soon ) after doing a 1031 exchange on a 3000 sq.ft. house flip. .... I went to a site called Keyvon and the estimate was $320,000, We paid $235,000. The tax value is: $290,000

Here's the story: We saved our pennies for years and bought a 2 story 3000 sq. ft. water front home on the river in Shallotte, NC. The home was super distressed. In 2007 the home was worth $500,000. It was foreclosed and sat empty for several years. Vandals tore it all to pieces. We paid $118.000 for it. We put another $100,000 in it and sold it for $395,000. We did the work ourselves.

We did a 1031 and bought 2 more properties with the money, and another $65,000 from savings within the 45 days. So, we spent $218,000 plus some rehab to both properties, and it puts us to about $268,000 in both properties. 

According to the good ole internet and Realtors, now our properties are worth $620,000........ So, $118,000 + $100,000 + $65,000 + 24,000 = $307,000

So, $620,000 - $307,000 = $313,000 give or take, plus or minus $10,000, either way? ..... I don't think that we did too bad.

Thanks so much, Guys! :)

Hi,

We just rehabbed our first commercial property that we purchased this past summer.  ( New paint, flooring, plumbing, ) .. It has 2 very nice office units which are 1000 sq. ft. each..... Both units are empty. A Nation Wide Insurance Company wants to lease one of the units. They will have a site inspector taking photos this coming week...... Now, I am in a bit of a panic to come up with a proper lease. ..... After doing my own survey of the area, the going rate is pretty much $1.00 per foot, per month, so a 1000 sq. ft. office is $1000.00 per month.

The building is in Brunswick Co. NC. .... I need to install a rent rate increase into the lease agreement...... How much percentage should I add per year? ( 3% --- 5% / other?

How many years should I lease or not lease / timewise? ..... I mean, what if they say 5 years or 10 years?

I am thinking about doing a Modified Gross Lease.

( Tenant pays: ..  Rent, Utilities, Janitorial, Interior Maintenance )

( Landlord Pays: ..  Property Taxes, Insurance, Common Area Maintenance )

If I am wrong about anything, please let me know, as I am brand new and wet behind the ears....... This Nation Wide Company, I'm sure, is used to doing a lot of leases every year..... They are pros, and I am not...... I am worried that they may get the best of us, if I am not careful.

Any advise to help me lease to a professional that knows all of the tricks would be great!

Thanks! :)

Mike 

Thanks Everyone! ...... According to my Attorney, they supposed to have rental and business insurance for themselves, so I am not responsible.

Talking about extreme bad luck!

I am a plumber, go figure...  I bought a 12 year old, 2000 sq. ft. office building a few months ago. It has 3 tenants and several vacant offices. I told the tenants that I will be rebuilding the toilets, ( tank bolts, seals, fill valve, flappers ) and replacing the water heater this coming week. I know how long things last, so I was going to do this work tomorrow 12/9/2017...... This past Monday morning, 12/04/17, one of the tenants called and said that the water heater exploded and the floors are ruined........... I missed it by less than a week!

We had to rip out all of the flooring, rent dehumidifiers, fans,,,,, the whole nine yards!...... They can't work in the offices because of the water leak.

Am I responsible to pay them for lost work? They keep asking me what they are supposed to do until the flooring is repaired, and the building is back on it's feet.

What a mess? .... What do I do?

Thanks,

Mike

Thanks Everyone!

I am not really asking for life advice. I was just wondering what you would do if you were in the same position...... Every little bit of feedback narrows things down for me, or makes me think.

Well, I was thinking more in the lines of a Medical Supply / Senior supply store,  rather than Adult day care. I would not be operating a store, or not forever... I still want to invest in Real estate. I realize that I would need to pay an employee or employee's. It just seems like with the huge amount of car traffic that I would make much more money than just $800.00 to $1,200.00 per month in rent from a tenant, in the long run.