Need help- office building purchase! - Posted by Kay (Indiana)

Real Estate Investing Office
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Posted by Dons on April 04, 2007 at 18:18:59:

My first thought was $85K for a 100K building is not much discount, and if it has been on the market for two years at $100K, it’s priced too high.

But you want them to carry financing. That changes the picture.

It’s the old adage “Your price, my terms… my price, your terms.” Sooooo $85K might not be bad if the property is in relatively good shape and the sellers are willing to carry the loan while you build up equity.

They want to retire and want an income from the property…either by investing the proceeds of a cash sale or by receiving payments over time. The net result is the same for them either way.

Yes you can own it personally and lease it to your corporation. That’s what I do with my office building.

Don

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Need help- office building purchase! - Posted by Kay (Indiana)

Posted by Kay (Indiana) on April 04, 2007 at 16:54:23:

Hi,

I am looking for advice on what to do regarding the possible purchase of a small office building in my town.

The property is listed at $99,900, but I know I can get it for around $85K. The owners have had it on the market for 2 years with no luck. They had it listed with a Realtor, but now they’re preparing to put out FSBO signs.

I am looking to get it for my own use, and I wanted to know how I should approach them with an offer. They said they would be open to considering a land contract (they bought it on land contract with a balloon after 3 years), but I want to make sure I handle it correctly.

I can’t come up with a lot of cash to put down on it, and one idea was to ask them if I could just take over their payments until I could get my own financing down the road.

They’re ready to wind things down and retire, and I’m hoping the fact that I’m young, with a young family will motivate them to want to work with me.

The office building is small (just perfect for what I need it for), and has some desks, dividers, tables, etc. that I wouldn’t mind having included with the property, as well.

Here are the numbers…

Possible purchase price: $80-90K
Electric: 135/mo. (all electric)
Water: 16/mo.
Prop. taxes: 2232.52/year

I have no idea how much they would want down, but I’m hoping I can weasel into not putting much down at all. My thinking is that they would love to just be done with it, allow someone they trust to take it over, and so on.

I had also considered, if I get it, leasing it to my corporation for tax purposes. Not sure if this can be done if buying on land contract, but it was a thought.

Will someone please help me?

Thanks,

Kay Berone
Indiana

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Re: Need help- office building purchase! - Posted by Frank Chin

Posted by Frank Chin on April 05, 2007 at 12:54:58:

Kay:

Here’s a few thoughts.

My dad was in a position to sell a commercial property to a doctor who needed it for an office. At the time, the problem was the mortgage needed was too SMALL to interest local banks, probably so in your case here as well, so it would have to be on some seller finance type terms.

At the time, the doctor was secretive regarding his own creditworthiness, so my dad was concerned that in his retirement, he’ll be chasing for mortgage payments rather than rent checks, and in his opinion, the same amount of work.

He asked me about it, and my opinion was there’s upside to chasing rent checks, as the property value would go up. On the other hand, foreclosure is a much longer, and riskier process.

If the owners are indeed retiring, if you address their need for security in their retirement years, not thinking about “did Kay make the payment yet” during a “around the world cruise”, then I think it would be something they’ll go for. Being open about the financial aspects of your business and credit would also help.

Probably a NNN lease with a option to buy would address both of your needs, with you excercising the option once your financing gets through. In this case, even if seller financing is given down the road, a good track record with your NNN lease payments will work in your favor.

You mentioned you’ll need it for your own business, in which case another option is you might want to check out SBA loans, which is available to businesses buying real estate for the use of the business. I recall my banker mentioned that 10% down is all that is needed. You cannot buy real estate with SBA loans and then use it as a rental.

Frank Chin