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re: To sell or not to sell commercial property?
Posted on 1/28/24 at 11:58 am to Mohican
Posted on 1/28/24 at 11:58 am to Mohican
See below, He hit the nail on the head. Low cash reserves with known needed improvements is risky. 1 year lease on a highly valuable property is weak.
Commercial banker here - sell it if it’s that kind of life changing money to you. A one year lease is a short fuse and a lot can change between now and then. Plus if you switched out tenants you’re probably looking at a few months of no income plus all the expenses of doing upgrades for the new tenant (given you can finance that in to the new loan).
On the flip side if you have a much stronger tenant in your back and can get the bank to finance in the rehab work then keep it. A stronger tenant at market rates is going to make the value of the building go up even more. But have that tenant in the back of your pocket. Don’t go to the bank looking for a new loan with a single tenant lease in place that has less than a year to it. Might not be a great conversation.
Why don’t you sell it, 1031 the money and put it into two or three cash flowing properties to diversify your holdings? Get with a good COMMERCIAL broker and discuss the options. Whatever you do, don’t use a residential realtor.
Commercial banker here - sell it if it’s that kind of life changing money to you. A one year lease is a short fuse and a lot can change between now and then. Plus if you switched out tenants you’re probably looking at a few months of no income plus all the expenses of doing upgrades for the new tenant (given you can finance that in to the new loan).
On the flip side if you have a much stronger tenant in your back and can get the bank to finance in the rehab work then keep it. A stronger tenant at market rates is going to make the value of the building go up even more. But have that tenant in the back of your pocket. Don’t go to the bank looking for a new loan with a single tenant lease in place that has less than a year to it. Might not be a great conversation.
Why don’t you sell it, 1031 the money and put it into two or three cash flowing properties to diversify your holdings? Get with a good COMMERCIAL broker and discuss the options. Whatever you do, don’t use a residential realtor.
1
Posted on 1/28/24 at 1:31 pm to southside
Never ever ever ever let owning commercial real estate be an emotional decision. Never.
It’s an investment. If apple stock starts tanking, you’re not going to keep it because you have your kid’s pictures on it.
Real estate is - how much money goes in at the purchase, how much cash flow is generated while you own it, and how much money comes out when you sell it (and what’s all your return for that). It has nothing to do with emotion
I’m a 25 year banker and can tell you one of the very few times I’ve foreclosed on a property is because an owner had too big of an emotional attachment to his property. And it was an investment property at that, he didn’t even occupy it. He had offer after offer and refused to sell even though the building was about to go dark.
So he ultimately lost the building, lost his equity and had to file a BK at the end of the day.
Pigs eat at the trough, hogs get slaughtered. I’d sell and buy a few properties. Get a really good commercial broker and diversify.
It’s an investment. If apple stock starts tanking, you’re not going to keep it because you have your kid’s pictures on it.
Real estate is - how much money goes in at the purchase, how much cash flow is generated while you own it, and how much money comes out when you sell it (and what’s all your return for that). It has nothing to do with emotion
I’m a 25 year banker and can tell you one of the very few times I’ve foreclosed on a property is because an owner had too big of an emotional attachment to his property. And it was an investment property at that, he didn’t even occupy it. He had offer after offer and refused to sell even though the building was about to go dark.
So he ultimately lost the building, lost his equity and had to file a BK at the end of the day.
Pigs eat at the trough, hogs get slaughtered. I’d sell and buy a few properties. Get a really good commercial broker and diversify.
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