I have a growing business that is in need of a larger building. I am thinking of buying a 10000sq ft warehouse in town.
Would love feedback.
Currently Renting
We rent around around 6000sqft of light industrial for $2500/month gross ($.40/sq ft). Not a great building, functional, but lots of leaks and no HVAC, etc.
We need around 8000sq ft - so figuring paying more like $.45/sq ft for a slightly nicer building we'd be around $3600/month
Potential Purchase
There is a 10,000sq ft building with two cargo doors, loading ramp, dock and high ceilings very near our current location. New roofing, easy access off the street.
It's near a sub-station and the railroad tracks, but it's not a bad part of town at all. Just... industrial. Older building (1965? Brick/Masonary construction) with new paint so it looks fancy
Offered around $775,000 and my broker thinks they will take $725,000.
Since I will buy the building and install my company in it, we should qualify (if I can survive the paperwork) for an SBA loan of 10% down. I've got that in cash, so we're cool there.
The note will be around 5.25% for 20 years and that means around $4400/month (without taxes, insurance, etc). So, maybe $5k/month in total cost to me the owner.
If I charge my company $.40/month in rent (being conservative even though the building is nicer than our current location), that's $4000/month gross rent I collect to pay the note.
Obviously we're not cash flowing here, I have no interests in being a 'real estate tycoon' I just see a chance to get a building for reasonable price per sq/ft and have my operating company cover most of the costs.
That will increase expenses at the operating company, but frankly I could use some more expenses or the IRS is going to get it all at tax time. We aren't rolling in dough, but we do pretty well. Does this pencil?
--
So, good people, what do you say? My company could also take 8000 sq ft and sublet the other 2000 to make up the difference, perhaps at a higher rent?
Is it crazy to buy into a commercial building that doesn't cashflow?
What am I missing, what am I not asking?
**I'm going to duplicate this post over at Bigger Pockets to get responses there too, I want love feedback from every angle**
Would love feedback.
Currently Renting
We rent around around 6000sqft of light industrial for $2500/month gross ($.40/sq ft). Not a great building, functional, but lots of leaks and no HVAC, etc.
We need around 8000sq ft - so figuring paying more like $.45/sq ft for a slightly nicer building we'd be around $3600/month
Potential Purchase
There is a 10,000sq ft building with two cargo doors, loading ramp, dock and high ceilings very near our current location. New roofing, easy access off the street.
It's near a sub-station and the railroad tracks, but it's not a bad part of town at all. Just... industrial. Older building (1965? Brick/Masonary construction) with new paint so it looks fancy
Offered around $775,000 and my broker thinks they will take $725,000.
Since I will buy the building and install my company in it, we should qualify (if I can survive the paperwork) for an SBA loan of 10% down. I've got that in cash, so we're cool there.
The note will be around 5.25% for 20 years and that means around $4400/month (without taxes, insurance, etc). So, maybe $5k/month in total cost to me the owner.
If I charge my company $.40/month in rent (being conservative even though the building is nicer than our current location), that's $4000/month gross rent I collect to pay the note.
Obviously we're not cash flowing here, I have no interests in being a 'real estate tycoon' I just see a chance to get a building for reasonable price per sq/ft and have my operating company cover most of the costs.
That will increase expenses at the operating company, but frankly I could use some more expenses or the IRS is going to get it all at tax time. We aren't rolling in dough, but we do pretty well. Does this pencil?
--
So, good people, what do you say? My company could also take 8000 sq ft and sublet the other 2000 to make up the difference, perhaps at a higher rent?
Is it crazy to buy into a commercial building that doesn't cashflow?
What am I missing, what am I not asking?
**I'm going to duplicate this post over at Bigger Pockets to get responses there too, I want love feedback from every angle**
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