I’m interested in a light industrial building for sale by owner;
Price: $425K
Sq. ft: 8500 (1000sq ft airconditioned front offices and rest 20 ft high bay with 12ft overhead door).
Building appears to be well maintained and in good shape. I’ll be dealing directly with the owner. I’ve researched the area and rents in the area are around $4-$6/sq ft. $4 is really dumpy. I would estimate $500/mo for Tax and Insurance. What do you think is the right price for this building if I could rent at $6/sq ft. Do Light Industrials’ expenses resemble residentials (the %50 cost rule of thumb that is widely discussed here?). Also, typically the owners of these building are only responsible for the roof and outside structure, correct (HVAC too)?
Thanks.
-Is the property vacant?
-What is the status of your local industrial market? What city?
-How much land?
-What is the building made out of?
The 50% “rule” should not be used in commercial property analysis. Use an absolute net lease so the tenant will pay/reimburse all expenses to include the roof, structure, HVAC, taxes, insurance, maintenance, etc. Set aside maybe $.15-.25 psf annually in a reserve for major system replacements (HVAC system, roof).
Thanks for your response tp. Below please see the answers to your questions:
-Is the property vacant? Yes.
-What is the status of your local industrial market? What city?
The Light Industrial market seems to be very tight. I have been driving around and there are very few vacant building.
-How much land?
About 1/4 of an acre. No landscaping.
-What is the building made out of? The front of the building has a grooved conceret look (painted) and the warehouse area is all cinder block. All of the building is freshly painted and windows and doors are all in good shape.
The area is heavy Light Industrial with the new buildings selling for $60/sq ft. The owner used to occupy the building for 10 years. This is my first go at a commercial building and I have difficulty figuring vacany in my analysis.
Thank you.