First industrial after six years of apartments, and the yard easement was the deal

As the sort of business that rents units exactly like yours, thank you for fixing the easement instead of hoping. I've been the tenant on a handshake yard twice, and the second time the property sold to someone who fenced it off in month two and I moved out at the next renewal. Your welding shop knows how rare what you just did is. That's the kind of thing that gets you a renewal at asking rent without a broker.

Coverage of 1.21 with 14 months of term on half the building is tighter than I'd want. What's your plan if unit B leaves?

$80 a foot for two dock doors and a yard is a good buy in most markets I look at. Nice work on the price.

Numbers check. $60,000 gross to $54,000 NOI means you're only carrying $6,000 of expense, which is 5 percent management at $3,000 plus $3,000 of reserve on 8,000 sf. That reserve is 37 cents a foot. On a 1987 building with two original roofs and two original dock levelers, I'd want closer to a dollar a foot, which takes your NOI to $49,000, your cap to 7.7, and your coverage to 1.10. That's still bankable, and I'd rather you knew now that your real cushion is $4,300 a year, not $9,300. What's the age of the roof?

The welding shop is the tenant I'd watch closely, and not for credit reasons. Hot work in a leased building raises questions about your insurance, ventilation, and often the fire marshal's inspection cycle. Ask for a copy of their certificate of insurance every single year and read what it excludes, because welding and cutting operations are excluded more often than owners realize. I've seen a landlord discover after a small fire that the tenant's policy had a hot work exclusion. Requirements vary by jurisdiction and by carrier, so check with your own insurer in writing about what your policy expects the tenant to carry.

What I want to know is how you found it. A two tenant 8,000 sf building in an older industrial pocket at $80 a foot doesn't show up on the sites I watch, or if it does it's gone in a week. Was this listed, and did you compete? I'm sitting on capital and my whole problem is deal flow at this size, everything I see is either a $12M distribution box or a garage.

cairn, since you own both, which is actually less work per month, the eight apartments or the two industrial units? I keep going back and forth on strategy and this is the comparison I can't get anybody to answer with specifics rather than vibes.

kestrel, from the service side, the honest comparison is that industrial is quieter month to month and much lumpier. Eight apartments generate maybe fifteen small calls a month. Two industrial units generate one call a quarter and then a $30,000 roof or a dock leveler that has to be replaced this week because a truck is sitting there. Different nervous system entirely. cairn, on your side, get both tenants to put maintenance requests in writing even if they'd rather text, because in five years when you sell, the file is what proves you maintained the building.

I hit my ceiling at four small residential properties and this is the kind of move I've been circling, so the easement detail is the part I'm taking. My question is about the 14 month lease. Did you price that in, or did you pay a stabilized price for a building that's half short term? At $80 a foot against comps at what, $85 to $90, it looks like you got maybe a small discount. If I were the seller I'd have argued the HVAC contractor's three years carried the whole building and the welder would obviously renew, and I'd have been guessing.

I've been reading this thread mostly to pick up vocabulary. What I understood: NNN means the tenants pay the taxes and insurance and you still end up owning the roof, an easement is a recorded right to use somebody else's land, and title exceptions are the list of things attached to a property that a lawyer reads and a buyer usually doesn't. What I don't understand yet is why a bank was comfortable at 1.21 coverage when half the rent expires in 14 months. Is that normal for industrial, or was it because the tenants had been there a long time?