Blazin
Creative Title
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Just signed a contract on my first piece of investment property. I have bought several properties before but never one solely as an investment so this is new ground for me. Hoping over the next few years to phase out of contracting and into real estate for long term cash flow. Just wanted to share my experience if it might be helpful to others or if any commercial/industrial landlords want to chime in that would be great.
I don't want to own residential property, this piece is distribution and warehouse and it's not that big, I wanted to start with something smaller not wanting to make rookie mistake with large sums of money.
Property Info:
4700 sq ft
Warehouse
12-15' ceilings
3 dock doors
2 Ground lvl drive in doors
Small office area, ample parking sitting on a level 0.50 acre lot
It's a free span (means no internal columns) steel structure with metal siding and roof.
Listed at $238,500.00
This is a little spreadsheet I use when looking at real estate from an income perspective.
There are plenty of people investing in real estate who are happy with a cap rate of 6-8%, I'm trying to be a little more patient/picky and see if I can beat that, usually requires taking more risk, but one my primary reasons for doing this is to take more risk than I currently do with stock and bond investments where I'm usually averaging 5-6% because I tend to be too risk adverse (for example I'm currently out of the market like a freaking tard biscuit).
As far as lease rates, the property is currently leased at $5.95/sq ft. This is high for warehouse space in my area and the premium is being paid for the easily accessible dock doors on a small sized building. That combination can be very hard to find. However, the tenants lease is up in early 2014 and I didn't want to take the risk that I could keep them or find a new tenant at that high of a rate so I plugged in at $5 sq ft then increasing 3% a year after 2017. Again I'm trying to be on the conservative side with my estimates to see if the property is still attractive at those numbers.
I also took into account the type of construction and what it would cost to build this building and his asking price put it over $50/sq ft which I felt was high for a steel structure of this type. So I put in my offer at $200,000, he very quickly countered saying the lowest he would go was $215,000 and I told him my price was not going to change. I figured it was a dead issue at that pt. The agent called again saying he'll go as low as $206,000 but that was the lowest he'd go, again I said my price wasn't changing. They now come back and tell me they'll take my offer.
So I have 30 days to settle and become a landlord. I'm going to borrow part of it, and I haven't had a loan for anything since 2005 so that is a little stressful not because the payment is that daunting but borrowing always feels like digging a hole to me, but I know I can't make this transition away from contracting if I don't start to leverage.
From a negotiation stand point I absolutely love buying something I don't need, if I went into this "wanting" it I may have paid a good bit more than I did, but I figured if he said no it was no big deal and I would just look for someone more eager. I plan to take all the cash flow from this to pay it off then use it to fund another property. It will probably take a few years to get any decent size snowball going but I'm not getting any younger and there are lots of girls on the internet who need my money.
I don't want to own residential property, this piece is distribution and warehouse and it's not that big, I wanted to start with something smaller not wanting to make rookie mistake with large sums of money.
Property Info:
4700 sq ft
Warehouse
12-15' ceilings
3 dock doors
2 Ground lvl drive in doors
Small office area, ample parking sitting on a level 0.50 acre lot
It's a free span (means no internal columns) steel structure with metal siding and roof.
Listed at $238,500.00
This is a little spreadsheet I use when looking at real estate from an income perspective.
There are plenty of people investing in real estate who are happy with a cap rate of 6-8%, I'm trying to be a little more patient/picky and see if I can beat that, usually requires taking more risk, but one my primary reasons for doing this is to take more risk than I currently do with stock and bond investments where I'm usually averaging 5-6% because I tend to be too risk adverse (for example I'm currently out of the market like a freaking tard biscuit).
As far as lease rates, the property is currently leased at $5.95/sq ft. This is high for warehouse space in my area and the premium is being paid for the easily accessible dock doors on a small sized building. That combination can be very hard to find. However, the tenants lease is up in early 2014 and I didn't want to take the risk that I could keep them or find a new tenant at that high of a rate so I plugged in at $5 sq ft then increasing 3% a year after 2017. Again I'm trying to be on the conservative side with my estimates to see if the property is still attractive at those numbers.
I also took into account the type of construction and what it would cost to build this building and his asking price put it over $50/sq ft which I felt was high for a steel structure of this type. So I put in my offer at $200,000, he very quickly countered saying the lowest he would go was $215,000 and I told him my price was not going to change. I figured it was a dead issue at that pt. The agent called again saying he'll go as low as $206,000 but that was the lowest he'd go, again I said my price wasn't changing. They now come back and tell me they'll take my offer.
So I have 30 days to settle and become a landlord. I'm going to borrow part of it, and I haven't had a loan for anything since 2005 so that is a little stressful not because the payment is that daunting but borrowing always feels like digging a hole to me, but I know I can't make this transition away from contracting if I don't start to leverage.
From a negotiation stand point I absolutely love buying something I don't need, if I went into this "wanting" it I may have paid a good bit more than I did, but I figured if he said no it was no big deal and I would just look for someone more eager. I plan to take all the cash flow from this to pay it off then use it to fund another property. It will probably take a few years to get any decent size snowball going but I'm not getting any younger and there are lots of girls on the internet who need my money.
