04/30/2025
Commercial Real Estate Case Study # 1:
This property was purchased in November 2023. The owner died 2 years prior and we dealt with a court appointed representative of the seller’s estate and probate attorney. It was not marketed well (good for us), but at the very least it was a covered land play as it was on 1.5 acres, in the path of development and near a major intersection in Lake County, FL.
After a site visit we quickly put it under contract and ended up negotiating an $80,000 price reduction after the due diligence period because we smelled blood in the water (would’ve closed regardless). The property has 2 buildings - a 5500 sf industrial building with 7 small bay units (10 ft roll down door, regular door, power), a 2300 sf building that has an office/retail space in front and six 12 x 20 storage units in the back. The property also has a 1/4 acre of space behind the retail/storage building and another fenced 1/2 acre in the back with separate gate. The 2300 sf building hadn’t been rented in 6 years because of what the attorney told us was a “problem with the city” and both open yard storage spaces were not utilized.
When we closed on the property at an 8.5 cap rate it was bringing in $3980 in gross monthly rent at 50% occupancy plus untapped potential in the open yard areas. A beautiful short term value add opportunity and long term redevelopment play it was.
After closing we got to work:
-$35,000 of renovations.
-Raised rents on existing tenants in the industrial small bay building.
-Leased the front office/retail space to the local Alcoholics Anonymous Chapter on a 10 year lease with 2% annual rent escalations (“problem with the city” was just a matter of bringing the space up to fire code).
-Leased all 12x20 storage units.
-Leased the first 1/4 acre open yard storage area for storage of boats, trailers and to an auto repo guy.
-Leased the back 1/2 acre open yard storage area to a company who buy and sell RVs.
1.5 years later the same property that we inherited with a $3980 gross monthly rent clip now brings in $8765 per month which at that same 8.5 cap rate is a $1,100,000 valuation.
