Commercial Investment Advice

[spike9294]

Hello,

I am looking at a commercial investment, a 15 unit storage building. It is 3 years old, listed at $139,000 and gross is $1335.00 a month. Building is fully occupied with a waiting list.

I have purchased residential, but never commercial and would like any advice I could get. Any information on hidden cost, mortgage options, interest rates and brokers that deal with commercial properties would be a big help. My current broker does not deal with commercial.

Mike Finlan

 

[invst4profit]

Can`t answer your questions but will say based on the gross the asking price is WAY too high.
Get all the numbers from the owner and find out exactly what the monthly costs are. Taxes, insurance, maintance etc. Expect him to fudge some numbers to make it look better than it is.

 

[kboughen]

QUOTE (spike9294 @ Jun 12 2008, 11:22 AM) mortgage options, interest rates and brokers that deal with commercial properties would be a big help. My current broker does not deal with commercial.
Hi Mike,


Mortgage interest rates will be higher than residential rates and Lender fees are probable. The exact numbers will be property specific, but for your analysis purposes I would use rates anywhere from 8 – 15% and a 2% lending fee. Ideally, the seller would finance you, if this isn`t and option and you want to proceed with the mortgage approval/quote process, you should request the last two years of financial statements from the seller and complete a commercial mortgage application. This along with the Listing and Offer would get the process going. Drop me an email or call me with any questions.

 

[Thomas Beyer]

I`d say price is WAY TOO HIGH .. look for AT LEAST a 10% CAP, i.e. NOI / PRICE. ALso, mortgage will be MUCH higher than residential or traditional commercial, and loan-to-value perhaps 50 to 60% tops.

NOI is gross rent minus all expenses such as: taxes, lights, insurance, and MANAGEMENT which is expensive for a small unit like this.

Consider WHO is doing the management like cash or credit card collection, handing out keys, cleaning out storage if unpaid bills .. and likely this MAJOR PAIN is the reason why he is selling ! Are you willing to work for $2/h ?

Unless they lower price by 50% or so .. or you are willing to accumulate 1000`s of units with a efficient management system, I`d say: do NOT do it !

Consider buying a REIT instead, such as IS.UN (In-Storage REIT) .. yield is well over 10% .. it is liquid and no hassles.

 

[JesseLee]

QUOTE (spike9294 @ Jun 12 2008, 11:22 AM) Hello,

I am looking at a commercial investment, a 15 unit storage building. It is 3 years old, listed at $139,000 and gross is $1335.00 a month. Building is fully occupied with a waiting list.

I have purchased residential, but never commercial and would like any advice I could get. Any information on hidden cost, mortgage options, interest rates and brokers that deal with commercial properties would be a big help. My current broker does not deal with commercial.

Mike Finlan

You will find that its very difficult to get a mortgage for a purchase of $139,000. A lot lenders require max 65% LTV and the borrowing amount is min. $100,000. For for your case you`re unable to meet both.

I have a similar purchase and I have to use my own HELOC to pay out the whole price, so basically I borrow money from bank and then lend it to my self, easy to qualify

. The good thing is that I pay prime rate only, and the bad thing is that I used up all my HELOC and no way to draw more money...from REIN pespective, its not wise, but I just found no other way to work it around.

 

[spike9294]

QUOTE (JesseLee @ Jun 15 2008, 09:22 AM) You will find that its very difficult to get a mortgage for a purchase of $139,000. A lot lenders require max 65% LTV and the borrowing amount is min. $100,000. For for your case you`re unable to meet both.

I have a similar purchase and I have to use my own HELOC to pay out the whole price, so basically I borrow money from bank and then lend it to my self, easy to qualify

. The good thing is that I pay prime rate only, and the bad thing is that I used up all my HELOC and no way to draw more money...from REIN pespective, its not wise, but I just found no other way to work it around.

Thank You all for your feedback. Very helpful.

Mike