Thank you for your excellent suggestions. I’ll definately keep them in mind particularly about vacancy filling point of view. One of the main reason for looking at a long distant properties is that I am priced out in this TriState Area market around NYC. The property values have skyrocketed (REIT’s, Foreign Money etc). The negative aspect is that I have visited this town only couple of times and hence do not have any insider outlook. There isn’t any easy solution unless I find some local Real Estate Investor as a partner.
The building is in the downtown area and has number of big box stores around. The College is about couple of miles from this location. I am also going to ask detailed Q’s about asbestos usage in the building since it was contructed in '71. Presently it has five offices, a copy/lunch room, conference room and a partial basement for storage. I think it can be easily remodelled to the needs of the new renter in future.
I am looking at a single tenant commercial office building of 6000 sq.ft. constructed in 1971 on an 1 Ac lot in the Midwest. The building is on a slab with brick structure and flat roof. There is an existing NNN lease of $50,500 lasting till Nov. 2008. The ‘asking price’ is $575,000. The building is situated in an University town. There aren’t any bumps in the lease. CAP 8.7% Couple of issues:
How do you go about asking whether the existing tenant is interested in continuing to lease at the same address with the then going rate? The agent says the existing one is a long term tenant of 11 years. If he decides not to renew the lease then if I can not find a new comparable tenant it will be a dark property. (Being a midwest town I presume the leasing market is not like NYC/CA)
What factor one should apply to incorporate the long distance ownership as the property though net leased will be about 1000 miles away from me! One trip for two days will cost me about $1000 (airfare,hotel,car and meals)not including any charges for my own time.
And finaly the bottomline ‘Q’. What price the experienced investor would offer?
Thank you in advance for the suggestions and solutions.
there are several qqustions embedded in your post.
owning propery at a distance has been addressed many times here. generally speaking, it is not the preferred way to go. but there are people here, like me, who have done it. and I did it with 1-4 unit residential stuff on scattered sites. You would have a single-tenant, NNN deal. your deal would be A LOT EASIER.
I would not assume anythng about this midwest town, and its capacity to fill a vacant office building. you need to research the market and find out. is the layout such that it would be attractive for a new business? how hard/expensive would it be to subdivide the space? how much vacant office space is there right now? what have the past 5 years looked like? what is the prevailing wisdom about the next 5 years? this risk needs to be incorporated into the cap rate at which you buy the property. you might want to talk to a different commercial broker about the office space market there (the one you are working with wants to get this deal closed, and his opinion might not be as candid as you would like).
I remember looking at a Blockbuster Video concrete tilt-up big box in a small resort town south of Dallas. fairly attractive proposition, until we looked into the abbyss. when the lease was up (or if BBV went belly-up), there was NOONE who would likely be able to use such a huge space in such a small place.