Debating Property Purchase Options

[Russell Detail]

Hey all,

So in my hometown here in Ohio, an interesting lot has recently been put up for sale, including a sizeable building that seems to be ideally set up for automotive work, and appears to be easily manipulated for any detail work I could hope to get into.

Typically I would not be eager to contemplate the risk of investment into a commercial space when I have a relarively cheap, vurtually free space for on our farm. This lot has several things going for it in my eyes though that makes me look at it in a different light :

1.) The simple fact this is a 3-car garage sized facility, complete with office, and a nice looking 10-ton hydraulic lift is inside - I figure even if I choose to remove the lift it could easily be sold locally and thus keep extra $$$ in my pocket.

2.) Lot includes 3 smaller lots on the property on which residents are paying rent for their mobile homes - $575 / month (I believe for all 3, doubt they are paying that much per lot here in small town USA, would have to confirm details with realtor)

3.) Property also includes a sizeable parking lot adjacent to a small grocery / conveinience store that was recently constructed in town.

4.) This lot resides on the busiest street / block in our city. Virtually 90% of all daily traffic is past this building every day. For our area you will not find a heavier traffic flow past a commercial property. The adjacent businesses are the biggest we have, including gas stations, a restaurant, and pharmacy.

Basically I'm looking for opinions on the situation. I am certainly not sitting on the 125K the realty company is asking, so I would have to look into financing options - an area I haven't had extensive experience in - my gut tells me it would be far from easy to waltz into the local bank and have them supply the funds.

What do you guys think? What would you do?

I think that the level of professionalism and exposure the location would provide would be well worth the six figures I would have to invest, but just something to ponder!

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[FUNX650]

Sounds like you're interested enough to sit down with
-your family for an open discussion
-the realtor for an honest, heart-to-heart bargaining session;
-your insurance agent for the amount of your rate increase
-mortgage firms for loan possibilities.

Wellsville...Home to the scoring-machine: Bevo Francis. http://smileys.emoticonsonly.com/emoticons/b/basketball-3855.gif

Bob

[wheaton2010]

Having owned a business (not a detailing business) for over 35 years I can tell you that the bottom line is that you have to be profitable. Keep in mind that the $125k for the property is only the beginning. On top of that you have other ongoing expenses. How much are the taxes? How much will it cost to heat the building during the winter months? How much will a new roof cost?
Since there is an existing lift the building must have been used for auto repair. If you buy the building, the EPA says you are responsible for any hazardous waste cleanup from the previous owners. The most profitable years I ever had were the years when I worked out of my home (before it was cool).
However, if you have the space on the farm, why don't you see if you can buy the lift. I love mine. There is nothing easier than detailing bumpers and the lower 1/3 of a car when it is up on a lift! Good luck! PM me if you have questions.

[57BORNTORUN]

Maybe you could pull a page from the show "Breaking Bad" and get it for less.(kidding).Any Comps. from the area.Age and quality of the structure?You will probably have to sign a contract before you due your "Due Diligence"....Inspections-roof, electrical, plumbing, parking area ect).Personally I would keep the lift if it`s in working order as you never know would you may need it and when sold used they are not worth that much and may add to the resale or rental value should it come to that.:buffing:

[Chicago Tommy]

Ok, here is my take on this. You're in a tiny postage stamp sized town. Will you do enough business to crack your nut? You need to be fully licensed, insured, all that comes along with a brick and mortar establishment.

Who was the previous occupant? What was their standing with the community? You don't want to pick up where someone else failed.

What is your business plan? Don't say "I plan to detail cars". Plan to succeed or expect to fail. Where is the business in 5 years, 10 years, how do you expect to get there? Who are your customers. How do you intend to reach them? Who is your competition? How do you intend to put them out of business.

Can you afford to lose money for the first 12 months? Any expectations for the winter season when business is slow? Have you already built up a war chest? Planning on tapping any current assets?

Is it just going to be yourself, or will you employ others? Insurance for yourself and employees. Unemployment insurance, payroll taxes, all that kind of fun stuff will take a bite.

On to the property. I don't see a 3 car garage commanding that kind of money. Could you build a similar or better building for less money? Are there available outlots? Look at lot prices in the area. Commercial real estate in the "heartland" of America shouldn't be too terribly costly. You might even find a better location.

With that say, if you intend to proceed on this property, don't just rely on an appraisal, also get an inspection. You want to know every code violation and potential problem before plunking down your hard earned dough.

Another consideration is return on investment. What will this building give you? Will you make $20,000.00 more per year? I have doubts that the building will appreciate much if at all, so that is a zero sum.

Hopefully this gives you some food for thought. I'm not trying to come off harsh, just a little devils advocate. Does this stir up any more questions from you? Have you at all looked into financing? Commercial typically requires 20%-25% down, cash. Would the current owner finance the property to you at better terms? Look into SBA loans, I believe they have some rural development options.

[Russell Detail]

Appreciate the feedback guys.

A lot of excellent points were made regarding the finer details that I didn't necessarily bring up. For that, thank you!

The property does have a second, but dilapidated 3 car garage behind the main standing and newer building.

Ideally I would love to secure the financing to construct a brand new building here on our farm, the existing structure is solid and extremely large, but over the years, time - the cruel mistress she can be - is showing her signs of wear. Had grazed the surface of SBA programs, but absolutely need to research quite a bit more.

Over this past year I have kept, and updated a business plan for my next 10 years, adding and adjusting content as I go, so I won't say I'm flying blind by any means, but in the end I see the points discussed here, there are so many things to prepare and have handled to operate a commercial location even in small town USA.

I won't lie, I enjoy and love every bit of working from home, definitely something I am extremely fortunate to have the availability and comforts.

I've talked with some of my clients regarding it and the concensus seems to be that it's totally appropriate and effective to work from home. As many of them do the same.

In the end it's probably the OCD aspect of myself wanting to portray a specific image for myself and the business I create. Can't really be blamed for aiming quite high can I?

Again, thank you guys, great points made - and yes, Bevo is a hometown basketball star from back in the day, I have detailed vehicles for em'. Pretty sure a basketball is floating around with his autograph too! ;-)

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[Pureshine]

I'll be honest I could go get a place for detail business but love working from home and the money I save is a huge plus for me. I've never had a customer care that my shop is in my garage. If your wanting to grow your business you will have to get a bigger place.

[dcjredline]

My opinion is that this would have you growing too fast. You might succeed, you might not.
What would I do if I woke up in your shoes? I would pass on the new building. The only way I would do it is if I had customers coming out of my ears and couldn't possibly serve them without this building AND had the cash in hand (from working my butt off from my home base) to buy this building.
Debt puts a much bigger strain on you and your new business venture. I wouldn't do it. NOT yet.

[Chicago Tommy]

I just got pinged there were replies to this thread. I'll elaborate in the morning, but why not rent? Try it out and go from there? You could always move it back home if it didn't go as planned.

It's your dream, try to achieve it.