OfflineDo not know what to do !!
I have not long started Deans Course, and have no idea how to even go
about a 'commercial property' deal. I have not yet accomplished a sale
and have only just started putting the business together.. So, here's the
'Challenge'..
I have (accidentally) found a commmercial property of 7.2 acres, slap bang
in the middle of a rapidly developing city. It has one empty office building with 14 offices and car parking lot. It's in a very beautiful part of town and borders a huge 'Blue chip'
company one side and a very well known college the other side.
It is currently PRIVATELY owned and the owner owns it OUTRIGHT.. NOT A PENNY OWED ON IT !. I know the owner. He has not listed it YET, but is going to
within a few days. It is zoned for commercial use. He has had an appraisal for $1,250,000 but wants to let it go for a quick
sale. He is very willing to be creative. There are no taxes owed on it.
He is hinting that he will take lass than $1,000,000. (Thats a potential of over $250,000 profit ! I know that appraisal and FMV may be a little different)
He has (so far) kept the Realtors at bay in efforts to hopefully sell it
Privately. But he is going to sign up with one within a couple of days
if there is no interest from me.
He stated that it would be worth razing the building to make way for the
developement of something bigger and better.
Now, I KNOW i'm out of my league with this .. Does anyone have any suggestions
as to who might help or be interested in looking at this.. or even telling
me that it's a waste of time. Where do I go from here,, what do i do next ?
Should I do anything at all ?
I have heard of a chap called CBRpower.. how do I get a hold of this chap
and get some pointers from him (he is in my area).
As i said ... H E L P !!
I did try to post this just a while ago but i think
it bombed out into the big internet black hole.. it
just disappeared ! So if it surfaces again somewhere that it should'nt.. i most humbly apologise.
Warmest Regards
British SAS motto: 'Who Dares, Wins'
I'M NEWLY A FAN OF DEANS. I PURCHASCED MY FIRST PROPERTY BY ACCIDENT, DOWN THE STREET FROM MY HOME. I NOTICED THE GRASS WAS GROWING HIGHER AND HIGHER. FINALLY I DECIDED TO FIND OUT WHO OWNED IT.I WENT DOWN TO THE COUNTY DEEDS OFFICE.IT WAS A FORECLOSURE NOT LISTED.I PURCHASED THIS PROPERTY FOR 47,000 PAID 3,000 FOR CLOSING,ME AND MY HUSBAND PAINTED AND REPLACED THE CARPET FOR ABOUT 2,000.00.GOT A EQUITY LOAN OF TWENTY THOUSAND THEN RENTED IT.TELL ME HOW I COULD HAVE ACOMPLISHED THE NEXT PROPERTY QUICKER NOW THAT I HAVE MORE EUITY AND CASH FLOW TO PURCHASE THE THIRD HOME.
Unless you have the ability to make payments on the property you either have to get him to carry some or all of it so that YOU can aquire the right to sell it....ie "assignment" or double closing. If you think its a good deal you need to get the word out.......ADVERTISE....craigslist, newspapers, internet forums......EVERYWHERE.......but you have to get him to give you a chance.....if he will sign an agreement with you and you can lock it up....you are on your way. The issue is that NOW is not the time to develop in the current market cycleand in most areas......even if the guy uses agents.....they won't be able to sell it either, SO......you could get him to agree to a bird dog fee.....then YOU work to find a buyer.....etc......many ways to skin a cat.....just be creative.
BUILD your knowledge base....it is your ARSENAL to wage war against disbelief and the negativity of the status quo. You need your weapons......It's your choice whether you carry them or not.
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Build Relationships and open the door to opportunities that could once only be dreamed of......never take those relationships for granted.
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Don't let EXCUSES be the nails that keep you INSIDE the box.
I never pay closing costs on my properties. I always have the seller pay the closing costs when it's a retail buyer.
"If you cannot do great things, do small things in a great way.”
Napoleon Hill quote
Is any part of the commercial property generating income? If the owner is willing to be creative, you're probably going to want to have him finance it. I had a similar situation, passed on the deal. I'll admit, it was VERY overwhelming, but I'm kind of regretting it now. Commerical property is a whole different game. Just the due-diligence is crazy on it. You could try wholesaling the deal for $25K. I found out that any commercial deal should have a minimum 90 day escrow. In some cases it's longer due to the due-diligence. You're going to need copies of the financial records, tax returns, existing loan documents, etc. Here is some due-diligence information I found.
**Preliminary due diligence checklist:**
Financial records:
Annual profit and loss statements (P&Ls) past 3 years minimum (5 years preferred)
At least one year monthly P&Ls (preferably two years)
Balance sheet (3 years)
Rent Roll including term, deposit, and payment history
Tax returns- 3 years
Insurance: Insurance Policy; including all riders, risk assessments, and disclosure affidavit for carrier
All Existing Loan Documents: including notes, deeds of trust, closing statements, title policy, rate riders, etc., and contact names and numbers.
Deed
All Leases: entire copies plus any addendum or riders.
Any service or advertising contracts: (Trash, extermination, maintenance, management, commission agreements, union agreements, vending, billboard, pay telephone, etc. and any instrument or contract to be assumed by Purchaser)
Copies of all recent appraisals, engineering reports, environmental reports
Survey (as-built), legal description, architectural and engineering plans and specifications
Payroll register: List of employees including name, position, wage rate, and entitled benefits
Business license
Physical inventory of furniture, fixtures, and equipment, and supplies.
Utility bills: Water, Sewer, Gas, Electric (at least two years of monthly statements) (or recap report from provider showing usage and cost)
Bank statements showing deposits for last twelve months (optional)
Phone system documents (y2k compliance letters)
Computer systems (y2k compliance letters)
Fire System inspection reports and y2k compliance
Property Tax tickets for the past three years (real estate and personal)
Litigation History: details of any past or pending litigation (if none, then affidavit from owner)
**Comprehensive due diligence: pre-closing**
Engineering Inspection and Survey
Environmental Inspection and Survey: Key Issues: Asbestos, Lead Paint, underground tanks, wetlands
Environmental Phase One: An Environmental Phase One (1) Assessment is an inquiry conducted to determine the environmental status of a property or facility in connection with a real estate property transaction. It follows standards which includes those published by ASTM.
Environmental Phase Two: Assessments/Subsurface Investigations: These projects include but are not limited to subsurface drilling and sampling, monitoring well installation and sampling, ground penetrating radar, and asbestos and lead sampling.
LUST survey- leaking underground storage tanks
Financial Audit
Title Search and policy
Property tax verification
Tenant Estoppel Letters
Mortgagee Estoppel letters
Legal Verifications: licenses, permits, zoning
I would also find out from a realtor what their commision would be on the sale of a million dollar piece of commercial property. You could use that to maybe get the price even lower to make it more lucrative to investors. I probably would not purchase the property myself because I have no clue how to run a commerical property at this stage of my investing career (I'm a newbie too). You could start with the preliminary due-diligence, go to REI clubs and try to feel out other investors. In addition, if you have your own realtor, let your realtor help you out. Tell them that if they help you with paperwork, etc. and you wholesale the deal then you'll give them a couple thousand for their time. You can go to creonline.com It's an REI Resource website. They have articles on purchasing commercial property. Hope this helps.
KimmyJ