Last week, I bought my 22nd rental property. It was a commercial property that was previously used as a restaurant. The property is not very large, and the lot is tiny, but it is in a great location. This is the second rental property I have bought this year, the first being a 68,000-square-foot strip mall. I bought the largest and smallest rentals I own in the same year. This property should be a great investment, but I have never tried to lease to a restaurant before.
How many rental properties do I have and what are they?
While this is the 22nd rental property I have purchased, I do not have 22 rentals since I sold a couple. I have 20 rentals now: 14 residential and 6 commercial. I bought my first rental property in December of 2010 and bought 15 more rentals over the next five years. Those were all residential rentals in and around Greeley, Colorado. I stopped buying rentals after 2015 because prices increased so much in this area that I could no longer make money with rental properties. The rents did not increase enough in value compared to the values.
I was about to buy rentals in Florida when I discovered commercial rental properties in Colorado. I do not mean multifamily apartment buildings but true commercial rentals. I went to Florida, met with agents, and found decent properties. When I realized I could make money with rentals in Colorado, I decided to abandon the Florida plan. It is so much easier to invest in real estate locally.
Below are the commercial properties I have purchased (click on the link to read a full article on each property):
How big is rental property number 22?
This property was used as a restaurant for many years. It was built in 1956, and I believe it has been a Mexican restaurant that entire time. The current owners had operated “Cisneros” for over 30 years, and before that Albertos was there, which is still operating in Greeley in a different location.
The property is not very big. The MLS listed it as 1,100 square feet, but that is just part of the story. The lot is only 1,250 square feet! That is smaller than many starter houses. The property has a tiny lot and building, but it is in a great location. The restaurant is on 8th Ave, which is one of the busiest streets in our 100,000-person town. The University of Northern Colorado is only one block away, and downtown Greeley is about 6 blocks away in the other direction.
You can see the video of it below:
Why is the location so good on this rental property?
Not only is this property very close to the college, but they are also starting massive development in the area. A local company has bought at least 16 properties along 8th ave, which they plan to redevelop in some way. They have already torn down multiple properties in the area, and they just started building one of them.
One one of the properties they are developing is right across the street from this rental property, and another one is one block away. The plan for this company is to connect downtown to the college area with massive projects. The property across the street will have:
“80 units, retail space, a food truck court, a gym, conference rooms, and an outdoor lounge at the northeast corner of 17th Street and 8th Avenue.”
You can read the full article in our local paper here: https://www.greeleytribune.com/news/construction-begins-on-massive-redevelopment-along-8th-avenue-corridor-in-greeley/
I thought this location was great for a restaurant before all of this development. It is awesome that all of this is happening as well.
How did I buy this rental property?
This property came up for sale on the MLS for $110,000 on a Friday. I had a lot going on that day, and I did not have time to look at it. I knew it was a great price because finding anything in our town for less than $200,000 is almost impossible. I decided to make an offer without seeing the property. I had to decide whether to include an inspection or not. I contemplated what the worst-case-scenario would be and figured even if the property was totally trashed, it would still be a good deal. I knew at that time this development was happening.
I made a full-price offer with no inspection to close in three weeks. The listing agent asked if I wanted any of the kitchen equipment for $5,000 more. He said the owners did not want it, so I agreed to take the equipment as well. I have no idea what it is worth, but I know commercial kitchen supplies are expensive! I also knew it would help make the deal go through. I ended up paying $115,000 for the property.
What will this restaurant rent for?
I am not exactly sure what this property will rent for, but I was also not sure what my other commercial places would rent for. I have been fairly close on my estimates and what we actually ended up getting. Rental properties 19 and 20 are both rented out for $1,500 per month, and I think that is what this one will rent for as well…if not more. If the new business can use the commercial equipment, that could be a bonus as well.
The property does need some work. The electrical looks old; there are some leaks in the sinks; there is some water damage on the outside; and it is pretty dated. With commercial properties, you do not always have to fix them up. In some cases, the tenants will fix the property up to their liking. I still want to make some repairs to make it look better before we lease it. Although, we do have a place interested in it already.
I am glad I was able to buy at least one more rental property this year. It has been tough finding deals to flip or rent out since our market is so strong. We are still flipping a lot of houses (15 going right now), but we have not been buying as many as I would hope to. Finding rentals with decent rent-to-value ratios has been much tougher.