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question about commercial property I inherited and what to do with it
Posted on 12/6/23 at 9:46 pm
Posted on 12/6/23 at 9:46 pm
Let me preface by saying I've lurked here for years, I never really made an account because I didn't want to get sucked in as im sure this is very addicting, I see the post counts. I am not a real estate investor. I'm actually a high school teacher in Texas. So this is a bit out of my realm but I made an account today and figured I'd ask for an opinion
I just inherited a couple properties 2-3 months ago and one is land and one is a a small office warehouse built in the 80s on a big lot.
The big property is 91,000 sq ft and currently rented through February 20,2024 to an 18 wheeler owner who has 6-7 trucks on the property and he's paying $2500/mo which seems really cheap to me for the lot size and office space, but once he leaves it has an office warehouse built in 1989 but is in ok shape. It is 3800 sq ft and has 7 offices and 2 bathrooms, I'm slowly learning about the space and understanding how values work and the VPD is 14,000 per day. That's low right for commercial property? From my reading online it seems so.
If I can't rent this I'd like to maybe knock it down and build something. What exactly would you build on a lot this big ? Is 14,000 VPD enough to build a shopping center? Would it be better to build townhomes or something slowly? there's a couple apartment building nearby, there's a neighborhood behind it. I have investment accounts I can liquidate if need be to try and build something here.
The other property is a 22,000 sq ft lot on a decently busy commercial road in a neighborhood of $300-400k homes surrounding it and its completely empty.
I was planning on sitting down over Christmas break when I'm not busy with school and calling a few realtors to see what I'm looking at. I just thought maybe some guys here could give me some ideas or thoughts. Also when you own the land and it's paid for, can you borrow against it to build? Or are banks willing to lend to you when you own it?
Sorry for all the questions, just really not my thing at all and now as the tenant runs out in 2 months im starting to worry about carrying costs ie property taxes, electricity,etc on the place if I can't find a new tenant so trying to figure out what to do. Thanks again
I just inherited a couple properties 2-3 months ago and one is land and one is a a small office warehouse built in the 80s on a big lot.
The big property is 91,000 sq ft and currently rented through February 20,2024 to an 18 wheeler owner who has 6-7 trucks on the property and he's paying $2500/mo which seems really cheap to me for the lot size and office space, but once he leaves it has an office warehouse built in 1989 but is in ok shape. It is 3800 sq ft and has 7 offices and 2 bathrooms, I'm slowly learning about the space and understanding how values work and the VPD is 14,000 per day. That's low right for commercial property? From my reading online it seems so.
If I can't rent this I'd like to maybe knock it down and build something. What exactly would you build on a lot this big ? Is 14,000 VPD enough to build a shopping center? Would it be better to build townhomes or something slowly? there's a couple apartment building nearby, there's a neighborhood behind it. I have investment accounts I can liquidate if need be to try and build something here.
The other property is a 22,000 sq ft lot on a decently busy commercial road in a neighborhood of $300-400k homes surrounding it and its completely empty.
I was planning on sitting down over Christmas break when I'm not busy with school and calling a few realtors to see what I'm looking at. I just thought maybe some guys here could give me some ideas or thoughts. Also when you own the land and it's paid for, can you borrow against it to build? Or are banks willing to lend to you when you own it?
Sorry for all the questions, just really not my thing at all and now as the tenant runs out in 2 months im starting to worry about carrying costs ie property taxes, electricity,etc on the place if I can't find a new tenant so trying to figure out what to do. Thanks again
3
Posted on 12/6/23 at 10:26 pm to thesabanizer
I am commercial banker and can answer the lending question. Yes absolutely could borrow against the property to do a building or some other kinda improvement. Can use the land for down payment or pull cash out of it based on value to improve it.
Where are the properties located?
Where are the properties located?
Posted on 12/7/23 at 5:59 am to thesabanizer
All I know is they are not making any more land so over generations land is usually a good investment.
Do you have anyone in your network in real estate?
I don’t know anything about this type of thing, but I’d look at my network and see who could help me sort it out.
My brother in law made his fortune in commercial real estate development/leasing. Maybe someone you know is in the space there?
Do you have anyone in your network in real estate?
I don’t know anything about this type of thing, but I’d look at my network and see who could help me sort it out.
My brother in law made his fortune in commercial real estate development/leasing. Maybe someone you know is in the space there?
Posted on 12/8/23 at 8:03 pm to thesabanizer
It's aggravating that a commercial broker is not giving you much of a response, but you really need one who knows the market to give you some advice on the warehouse site.
Most industrial leases are Triple-Net(NNN) which means that the tenant is responsible for utilities, pro-rata share of expenses, repairs, etc. You’d need a broker, or real estate attorney, to check out the existing lease and see what type of rent structure there is and give you some market insight.
Try to hold on to the current tenant if you can. If not, have a broker determine if it’s marketable and try to attract another tenant. Small industrial stuff can be a good fit for an owner-user sale if you decide you want to exit. Keep that cash flow going while you determine the best course of action.
Most industrial leases are Triple-Net(NNN) which means that the tenant is responsible for utilities, pro-rata share of expenses, repairs, etc. You’d need a broker, or real estate attorney, to check out the existing lease and see what type of rent structure there is and give you some market insight.
Try to hold on to the current tenant if you can. If not, have a broker determine if it’s marketable and try to attract another tenant. Small industrial stuff can be a good fit for an owner-user sale if you decide you want to exit. Keep that cash flow going while you determine the best course of action.
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