Retail strip mall... (15,000 sq ft building...about 10 units... currently rented to local businesses: Tattoo parlor, beauty salon, mini market, tax advisor, etc). Price $500k. Rents- $6500/mo at 90% occupancy. Room to move up rents.

For those who have bought this type of property...what's the good, what's the bad.

What is the age of the roof?

90% is a good occupancy rate - means the seller is honest.

The mix of tenants seems a tad bit off. I don't have any ink on me so the mix of taxes and tatts is a clash.

How long is the term of the leases?

The numbers seem alright for a class C area. What type of leases are these NN?

roof- 9 years old

lease terms 1-3 years

straight rent (landlord picks up maint, ins, taxes)

Going to have a little more turnover. A few more headaches. So make offer accordingly...

When I see 100% full, I think = yes but how many are actually paying.

Likewise when I see 65% gull, the owner is playing too much hardball for that neighborhood and is about to lose it.

At 90%, you have some turn over so the follow up questions should be how long has it been open and how are you marketing that one opening.

Those answers will allow you to determine if there is a value add )Marketing) to this location or not. There are lots of strip centers around.

The problem with tattoos biz in a strip mall is the clients that come. Or the "perception" of them. If a neighboring suit comes open, its harder to fill. My actual worse tenant was a dance studio. All the cars coming and going, parking while their kids danced.

Here is some of the questions you have to ask yourself:

1. Is it in a good location? Rule #1 in RE is location, location, location.

2.Do you want commercial space as part of your biz?

3. If one... two units come open, can you pay the bills still? It will more than likely not get filled real quick.

The financial strength of the businesses located in this building should be the concern.

An income tax preparation office and tattoo shop sure doesn't sound financially strong, and if they were to fail, what other businesses would locate there? How much would they likely pay?

I've only been doing commercial rentals since the start of 2020, and I only have one "retail" establishment. Most of mine are either self-storage or automotive/mechanic shops.

That said, your rent to purchase price numbers don't seem out of line based on what I've got.

What kind of structure: all metal, outside finish?

What kind of roof: flat, standing seam, etc?

Are utilities separated by unit?

How is the location? This is the key metric in commercial. People will drive 15-20 minutes to work from home without thinking twice. But customers--the lifeblood of a business--won't drive 30 seconds off the main drag unless there is something really special about the business they're looking for. To evaluate location, you need to know the average daily traffic count: how many cars go past that building in a given day compared to the population of the city? Location-location-location is important in residential rentals. Double/triple the importance level in commercial. Especially with retail. If your town has the kinds of buildings mine does along the main streets, you'll see all the store fronts facing the road are usually full. The units on the sides are somewhat full, but the ones in back stay vacant. No road frontage and/or poor visibility from drivers = non-desirable in retail. So not only is the location important, the orientation of the front of each unit is as well.

How is the on-site signage? Is there enough for each tenant to have a highly visible sign day and night? Is the sign electrified/lighted? If none of the above, is there room to add signage?

There are many more considerations, and the best way I've come up with the above and others is to think about this rental from the tenant's perspective. With residential, a home is a place to escape work. With commercial, a unit is a place to draw people into your work. What kinds of businesses will thrive? I have no problems with tattoo shops. I'm not into that myself, but half the folks at my church have tattoos now....one 80 year old grandma got one to match the one her grandson got. They are not the mark of gangster and seedy types like they were 20-30 years ago. One thriving strip mall in my town has a small gym, a nail salon, a liquor store, a CBD shop, a tanning shop, a natural foods store, and a candy store. No one bats an eye that you can get your nails done, get cancer, get obese, get your candy, and top if off with a 5th of booze....all within 50 steps.