My brother has found a warehouse with a small office that he is interested to buy. I plan to lend him money for half of the down payment. He found the property by an For Sale By Owner ads on local paper. Since neither of us knows about commerical real estate, I don’t feel very confident about the deal. The owner asked for 40% down and then paid it off in 3 years.
What type of due dilligence should we do? I could not find much information on warehouse sales. Should we borrow the money from regular mortgage companies?
Are there any catches buying a property directly from an owner? Where do we find comparable sales number? (the asking price is more than $100/sqft)
Thank you so much. We need to act soon (i.e., sign the contract). The owner said he had a couple of other offers.
I would make sure you do get an attorney review within your contract, this would be my first advice.
Also call some realestae offices that deal with commercial listings and ask for comps or cma’s and ask for there services this could be helpful.
I don’t know much about commercial real estate, but was somewhat involved financially when my employer bought warehouses. First Find out what was warehoused. If there was any contiminates stored, the property should undergo an environmental study or you could be up to your but in DEC problems later on down the road. However if they stored books, you may be ok. There’s alot more due diligence needed for commercial property, Typically, you could tie up contract with a little cash and increase it based on the inspection.
I don’t know where this property is, but I have to tell you that $100/sq ft for a warehouse sounds outrageously overpriced. To give you some idea, I’ve been searching for property with that basic zoning classification in Philadelphia, and it’s ranging between $20-30/SF.
My gut says stop in your tracks. I think this seller is trying to pull one over. I don’t care how many offers he says he has. Don’t let yourself be pressured. You could probably contact a few commercial real estate brokers in your area and ask them what warehouses go for.
I am working on a deal with extra high ceilings and the rebarred flooring full steel structure 18,000 sq ft free usable space with quite a fewbells and whistles to this property in the building for added features like high voltage, extra loading docks, running cranes across"I" beams with handheld remotes.
I am only paying 20.00 per sq ft and I get a bonus of 30 acres thrown into the deal besides this building which can be developed.
The main thing about commercial you may want to look at is the are for access of trucks for loading and unloading. Highway access. Competition in the area for logistics companies. Storage facilities and capabilities to turn this industrial into a commercial building besides all the red tpe issues. Cost of areas permittable footage lease and whether your costs could be covered with premium usage for short term tenants as a stop over for bigger companies using limited of your own funds to pay for building and being able to use a portion of it for yourself while having the bbills covered by your tenants.
An example is the larger company may make tractors but for some reason the tractors need to be stored or repaired by their personnel from a recall before going back to the retail outlets. In the interm most of theese companies do operate on the “JIT=Just In Time” shipping policy. Thus you can offer such a service for a short term to these clients at a premium rate allowing them to accomplish what they want but not locked into a long term tenant contract. You can also have more than one company paying for space at the same time and offer a redispatching unit there for the trucks coming and going for them as well to increase cashflow. For this service not only do you charge a premium you charge a monthly say 1% of the normal fee that they could lock in to always have available but you are guarnteeing them space and not have given to someone else since they signed this. That tiny bit of cashflow whether they are utilizing the space ornot would carry your taxes or the utilities and reduce your expenses.
This is a thought and I am doing the same thing when I get my deal complete as I have a client renting 13,000 sq ft and the other 5K is kept for myself where my employees will package and distribute their product line for the tenant. This is a three fold deal but this is also a positive cashflow generator and employment incentive since creating jobs I get tax breaks for the building and the employees which is good for future negotiations with the town since my deal is in a small community.
The more open you are to using the space and lletting others use it by paying and thinking out of the box in comparison to your local competition is always going to be profitable and could lead to long term relations.
These are just thoughts and only trying to be helpful not an expert by any means as I am new to this.
I’m not an investor in real estate. But I just bought a warehouse for
my business. Here in S. California, new warehouse under 20,000 sf
now cost $120-130/sf. If you want buy in City of Industry, it could
cost you close to $170-200/sf. The cheapest one I found so far is
$70/sf, but that one is under really bad condition.