Need to know the hidden costs in buying a commercial building esp on a land contract - PeachParts Mercedes-Benz Forum

strelnik · #1 10-10-2009, 04:03 PM

I am still #2 on the one building I want to buy, but I have at least two others in the same area and all are negotiable.

Now comes one seven miles from my house, 3800 sq feet, solid blonde brick with front office and all amenities. Includes a 2000 sq ft parking lot enclosed by 16 foot fense and razor wire (Hope the city lets me keep the razor wire)

Need to get in, look at it and find out about the hidden costs. So far, I have been counselled to check on:

1. The roof
2. All plumbing and water heater
3. All sewers and drainage and toilet
4. All electrical
5. All heating (AC- don't know if they have it)
6. Security-- all doors and windows, including large bay door.

Also check:

7. Results of any past code violations and/or visits by city
8.Taxes on building
9.Any other arrears
10. Any other expenses.

The guy wanted a land contract in his original proposal long before I ever looked at it The price has dropped from 200,000 to 88,000.

I am going to offer him max 75,000 with 2/3 down and a 5-year quick deal for the rest. I will start at 60,000 and work up, especially when I start telling him about the roof costs.

Most business owners never put anything into their building. However, I know how to make a building look better and be functional at low cost.
There are people here who give away lumber and plywood, and under the right circumstances, it can be used to make a ware house look pretty damn presentable.

So, wise ones, what else should I be looking at? Hattie, you're the builder. How many others have bought buildings in the last few years?

Am open to all suggestions. In the meantime, I just keep saving the money. Sold the spare 240D the other day that was originally for my son, money goes in the bank.

I don't have to feed this place and he keeps having to spend money, while I keep piling it in the bank.

Maybe January will be the best time. Maybe I should start negotiations and let them linger or reach an impasse and await a counter-offer.

The owner, his family and the realtor are all Taiwanese or mainland Chinese, I am not sure. They are not native born, I pulled all the property and corporate records so I know they can't write English well.

Let's see what their negotiating style is like.

Fun and games

Medmech · #2 10-10-2009, 04:13 PM

There should be no costs outside of attorney and recording/tax fee's. Although its expensive I think you must get title insurance and absolutely make sure that the contract is properly recorded so the owner cannot get a lien in first position. Also make sure you are triple dog sure that you can deliver on the balloon date.

lorainfurniture · #3 10-10-2009, 04:20 PM

I bought a building last year for 5,000 bucks. 750sq storefront, and 1 700sq ft apartment.
Things to look at:

Roof
Rotted beams as a result of the bad roof.

Get a copy of the violation list from the city. (big help)

Is it condemned? If so, run... Even the pretty ones get condemned sometimes.

Plumbing stolen? Was the main water line from the street broken off? Water bill?

Crackheads are now starting to steal electrical wire... PITA to sort out.

I would NOT put that much down.. Maybe 20k down and 55 1k monthly payments...no interest of course..

There are not too many people crazy enough to buy a piece of comm. property these days. Keep your money in the bank, not in their pockets... Or just offer 50k cash and see if they bite.. (you might be surprised, it worked for me one time)

Hatterasguy · #4 10-10-2009, 05:25 PM

Seems like you have all the bases down. I'd bring in another pair of eyes to look it over; sometimes other people spot things you miss.

What was this place before? Any inground tanks or possible environmental issues?

As far as financing, whatever terms you guys can agree on. Balloon's are fine just as long as you can either refi or pay them when they are due.

tankdriver · #5 10-10-2009, 06:13 PM

I just skimmed the post, so sorry if I'm repeating, but you should check for liens too.

Also, I know one guy who had a bldg and the AC unit was not strong enough for the space.

strelnik · #6 10-10-2009, 07:12 PM

Quote:

Originally Posted by Hatterasguy

Seems like you have all the bases down. I'd bring in another pair of eyes to look it over; sometimes other people spot things you miss.

What was this place before? Any inground tanks or possible environmental issues?

As far as financing, whatever terms you guys can agree on. Balloon's are fine just as long as you can either refi or pay them when they are due.

I've got a realtor who's a county commissioner in another county looking at it with me.
I'll have the history of the place soon, but in the past, the bldg was used to store restaurant equipment

strelnik · #7 10-10-2009, 07:12 PM

Quote:

Originally Posted by tankdriver

I just skimmed the post, so sorry if I'm repeating, but you should check for liens too.

Also, I know one guy who had a bldg and the AC unit was not strong enough for the space.

I plan to check everything about the building since the day it was made.

strelnik · #8 10-10-2009, 07:14 PM

Quote:

Originally Posted by lorainfurniture

I bought a building last year for 5,000 bucks. 750sq storefront, and 1 700sq ft apartment.
Things to look at:

Roof
Rotted beams as a result of the bad roof.

Get a copy of the violation list from the city. (big help)

Is it condemned? If so, run... Even the pretty ones get condemned sometimes.

Plumbing stolen? Was the main water line from the street broken off? Water bill?

Crackheads are now starting to steal electrical wire... PITA to sort out.

I would NOT put that much down.. Maybe 20k down and 55 1k monthly payments...no interest of course..

There are not too many people crazy enough to buy a piece of comm. property these days. Keep your money in the bank, not in their pockets... Or just offer 50k cash and see if they bite.. (you might be surprised, it worked for me one time)

I'm gonna consider the 50,000 cash or maybe 50K and 10K in a year, as the balloon.

Thanks for the help and I'll let people know what happened

strelnik · #9 10-10-2009, 07:14 PM

Quote:

Originally Posted by Medmech

There should be no costs outside of attorney and recording/tax fee's. Although its expensive I think you must get title insurance and absolutely make sure that the contract is properly recorded so the owner cannot get a lien in first position. Also make sure you are triple dog sure that you can deliver on the balloon date.

You are right, I need to find out about attorney's fees.

Hatterasguy · #10 10-10-2009, 07:53 PM

Make sure you get an attorney that does a lot of closings.

tyl604 · #11 10-11-2009, 10:07 AM

Spend $500-1000 on an MAI appraisal. If it's low, use it to beat the price down; if high, deep six the appraisal.

Figure out how much you can rent the building for per annum, deduct about a 10% vacancy factor, subtract annual operating expenses, replacement reserve, taxes, insurance and management fee and cap (divide) the remainder by 10-15%. That will give you a high and low market value which you can compare to the appraisal number.

Forget leaving your money in the bank if you are interested in appreciation; they are paying nothing for the use of your money. The real estate market will come back and that's the place to make some real money. Most of us think it will take another year to year and a half but it will come back. Prepare for some continued downtime for a while if you buy the building.

Have a pro do a title search.

tonkovich · #12 10-11-2009, 02:04 PM

please buy title insurance. (it's worth repeating.)

Thread Tools
Show Printable Version Email this Page
Display Modes
Linear Mode Switch to Hybrid Mode Switch to Threaded Mode