A first industrial purchase after apartments turns on an unrecorded yard easement

Take the perspective of a tenant renting a unit exactly like yours, and this is the fix that keeps them long term. A handshake yard is fine until the property sells to someone who fences it off in month two, and the tenant moves out at the next renewal because nobody put the arrangement in writing. A welding shop, or any tenant leaning on that kind of access, knows how rare a recorded easement is. That's the kind of thing that earns a renewal at asking rent without a broker.

Coverage of 1.21 with 14 months of term on half the building is tighter than most operators would want. What is the plan if the second unit's tenant 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 only $6,000 of expense is being carried, 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, closer to a dollar a foot is the safer target, which takes NOI to $49,000, cap to 7.7, and coverage to 1.10. That's still bankable, and it's worth knowing now that the 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.

For an operator holding both apartments and industrial, the useful comparison is which is actually less work per month, not which sounds simpler on paper. Industrial tends to read as fewer moving parts day to day, since triple net structures push more of the operating burden onto the tenant, but the diligence up front, on things like yard easements and dock access, runs deeper than most apartment buyers expect.

From the service side, the honest comparison between apartments and industrial is that industrial runs quieter month to month and much lumpier. Eight apartment units might generate fifteen small maintenance calls a month, while two industrial units might generate one call a quarter and then a $30,000 roof or a dock leveler that needs replacing this week because a truck is sitting there waiting. It is a different rhythm entirely, not a simpler one, for anyone moving from residential into industrial. On the tenant side, getting maintenance requests in writing, even when a tenant would rather text, tends to matter most at sale time, when that file is what proves the building was properly maintained.

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?