It was a tax forclosure. I may have a little holding time but the area has a lot of activity and relativly low vacancy.this bldg is one of the nicest among the vacant ones that are there.
If you re-read my earlier posts, you will find the answer to your question. No-one could possibly tell you what the building is worth based on the information that you provided. There are literally dozens (if not hundreds) of questions that need to be answered BEFORE you can intelligently decide what this building is worth - IF ANYTHING! Yes, the building could easily be worthless to an investor. Here are a few of the questions:
- What is the NOI for this building?
- Why are there 10 other vacant buildings in the area?
- What upgrades would you need to make to the building to attract tenants?
- Are there any building codes that govern the upgrading of the building? For example, will the rehab trigger a local requirement that a sprinkler system be installed?
- What is the vacancy rate in the local area?
- Are new tenants coming into the area or are the other buildings filled with long term tenants?
- Is the deed clear?
- Are there any encroachments?
- How long will it take to fill the building?
- What is the normal cap rate in the area for similar buildings? (just to give you a very rough idea of value)
ETC, ETC, ETC
I could probably make a list of at least 100 questions in only a few minutes.
The point is that you haven’t given enough information to make an intelligent decision. Why has this building been vacant for so long? Why are there 10 other vacant buildings? That doesn’t sound like a very dynamic area to me.
How long can you afford to hold the building once the rehab is done? The drain of cash could be HUGH while waiting for the building to reach break even! As I said before, commercial buildings can be vacant for what seems like an eternity!!!
This could be a great deal if you have deep enough pockets and there is demand for the building. This could also be the financial equivalent of suicide. In either case, based on your questions, I don’t think that you have the knowledge or experience to take on this project.
Mike
One question that comes to me is… Why did the previous owner go through a tax foreclosure? Could it be this building was sucking his pockets so dry he couldn’t even pay the taxes? Maybe not… but maybe it was. I also agree with property manager. I have been following all your posts and you seem to be too eager to jump into something big time that you are relatively new to. Sounds like a good way to lose it all to. Not trying to say you can’t do something, but don’t be ready to go make an offer as soon as you see something. I’m not saying be lazy and wait around, but just make sure it will work before you get into it. One of the best things you can do is let an accountant look at it. They can tell you if you will make money or not. They will take into consideration everything. And most likely, they will be right. If it is meant for you to have the property you will get it. If not, there is always another property. I know you have been doing rehabs, but commercial property and business is a totally different thing. For instance, I can’t remember all the details, but the laundrymat/gameroom idea to me seemed like a for sure bust. I’ve been around small business all my life and I’ve seen alot of people try to start up stuff like that b/c “the area doesn’t have one” and what happens? It doesn’t make it. There is usually a reason why an area doesn’t have something. Its usually b/c it won’t make it or it may make it but isn’t profitable enough. Not trying to be negative, just my honest opinion.
jcissell,
I sure do appreciate your input.Yes we are new to the commercial idea.The laundrymat /arcade idea was a way I thought would introduce us into commercial with little risk and hands on.Eager is part of the fuel that drives all investors.We have been looking for over a year now for a good deal.We have traveled to over 30 different cities in the US looking at property since Jan. of 2005 and have found an area we believe has great potential. My expertise in the due dilligence area has served me well to this point .We did not get the building we were trying to get .It was a 4 story 38,000 sq ft bldg that could have been used for 26 different retail stores once finished .Rehab would have cost about 30k to get it ready for a couple stores + installation of laundryarcade $90k ,and then we would have developed as we generated revenue. The asking price was $70k replacement cost on the building was $2.1 Mil we offered ,he he he $30k ;D we lost it to an offer of $75k. 
Its just recently I turned to this forum to see what the heck everyone else in the country is up to and to get some ideas of what is working as I havnt been able to find a good deal localy.I am one of those people who not only thinks outside the box I live outside the box,which is hard for a lot to even fathom as realistic.I have never and never will commit myself financially to something I cant buy my way out of.
Ive lost several deals in the past I was told about at 9 am and waited till after I got off work to go look at and they were already under contract. One thing I noticed about most of the rest of the country is that the way of business is like walking a country mile.You all get to things when you get to them.Here in Florida if you dont jump when the property says jump you you miss it.I have come accross a LOT of wanna be investors who think well Im not going to buy that because the last owner couldnt make it work so there must be somthing wrong with it.when in reality there was something wrong with the owner.In your little Carlton book it says look for property that has been on the market for a long time .That would indicate a possible motivated seller.I have traveled extensivly ouside the box and researched many areas of the country.If you look in your local paper or pasture you will notice there may be a few potential deals well some have stated I may be a bit jumpy and ready to buy anything.If you take the number of deals in your town and then broadened your pasture about 30 times you would find that there are more deals at your fingertips than you could even think about putting offers in on. So to those that dont travel past the corner market someone like me may seem a little off the wall.I do appreciate your input to my posts but with all due respect to your proffesionalism your speculations of people leads a lot to be desired.My current posts about whats it worth is about a building that has a current appraised value of $219K which is the asking price. A wholesale shister is very unethically advertising the property at $450k on his site .in its current rundown condition.revenue potential puts the estimated value once completed at about $2.5 mil the current replacement cost on the bldg is $1.7 mil.I offered them $100k cash .and am waiting for answer.I may be eager but Im going after the deals not waiting for them to come to me and with what Im finding as you can see If just one goes through it was worth all pokes and jabs ya all have to offer in the process.As I stated before thank you for the responses , keep up the good work and the armchair psycologists judgements of caracter ,it keeps ones head on earth.
Mike,
As always thank yo for your judgement of caracter ;DIts always a pleasure to meet someone willing to tell you about yourself .It would take a crystal ball to answer almost everyone of your questions.IF yuo only buy property when you have the answers to the questions you have posted you would never buy a piece of property.10 empty out of over 100 that would be …less than 10% vacancy(not bad)whats the net operating income .ITS VACANT.but the potential has been posted based on a study of the area.I met with the city planning board on use of the bldg and its current use is its intended use by us.Do you buy deed with leans and encumberances?I know I dont.No encroachments.How long will it take to fill ?How long will it take to fill?Could you please give me GODs phone # so I can ask him?Cap rate about 10%based on what the “realtors” are listing in the ads for prop. in the area and we all know how reliable that is.Maybe you havent read carefully enough to give an intellegent answer? Why has it been vacant so long ?TAX FORCLOSURE.State of Kansas takes 4 years alone for that process.A day vacant to a broke investor seems like eternity.
I dont know about the rest of you but I was taught and have learned how to make an estimated guess on the value of a peice of property as an investor with very few of the "union standard"facts available.Though I am unfamilliar with commercial which is why I am requesting assistance for my venture .However it seems as though I have attracted the YOU CANT DO THAT crowd.But I do appreciate the responses and concerns.
Sometimes you just need a couple people to point out the negatives just to make sure you have covered all your bases. As I began looking for a broker to work for, I talked to several in the area to see what they had to offer. The first thing one of them did was tell me all the realities and the negative side of real estate to make sure I was aware of them. I appreciated that b/c I really needed to know some of that stuff. I’m not saying your all talk, just thought I would throw up something you may not have thought about. Good Luck
Josh
And it is exactly what I appreciate.As I feel constructive criticism is our best guides in the process of making the right decision along with due dilligence to making the right decision.However a few answers to the origional question are also appreciated ;D