Posted by mike on April 27, 2006 at 15:32:44:
Can Ray suggest anything?
HIGHER and better use of Vacant properties - Posted by Mike
Posted by Mike on April 25, 2006 at 15:28:49:
Ive come across a few vacant structures in commercial areas. I had thought about buying them and putting a higher and better use strategy in place.
I’m wondering how long it would take to get a new tenant to build and lease the vacant structure. Im assuming the current vacant structures (small hotel and closed restuarant)would need to be torn down and new structures built by the new tenant. Would be nice to have a fast food restuarant or bank built on this land.
Im assuming if I got the properties under contract I would have to go with a commercial leasing company to atract new tenants?
Does any specialize in this type of commercial investing?
Re: HIGHER and better use of Vacant properties - Posted by ray@lcorn
Posted by ray@lcorn on April 28, 2006 at 09:29:23:
Mike,
That’s what I call “scrape and build”… I’ve done a lot of it. In fact I’ve torn down buildings we built to build something new. Redevelopment can be very profitable, but there are a number of hurdles to clear.
First and foremost is getting the property bought at a price that is equivalent to land value after the demolition. Environmental issues, zoning issues, stormwater management, utilities, access, and a host of details will have to be quantified in order to make an intelligent assessment of the value.
Don’t assume that because the use is in place it can be continued. In most cases the zoning and development requirements have changed significantly since the original structure was built, so the property must comply with the current standards. If the new use takes a zoning change or special use permit, then the time required will increase accordingly. (e.g., in my hometown a bank is a by-right use for the commercial zoning districts, but the speaker for the drive-thru requires a special use permit. Several deals have tanked over that issue.)
Second, the proposed new tenant(s) will have their own requirements. In my experience it is rare to get a build-to-suit deal signed without extensive negotiation. In some cases that may be through a broker, in others through direct contact. Much depends on your own experience and contacts.
Regardless of who initiates the deal, you’ll need to know your costs as outlined above before you can quote any kind of lease rate. It’s usually best to use an option to control the property while all the above is investigated. That way you have all the advantages of control without the burdens of ownership.
ray