Many questions - buy a warehouse?

[53 hemi]

Ok; here's the situation. I live on a sailboat in New Orleans. I rent a garage to keep my vehicles and tools in. I've recently come across a small warehouse for sale in a decent area.

The building is brick; 29' × 116' with a concrete side slab 7' × 116'. It was last assessed at $35000. Zoned light industrial. Taxes estimated at $4000.

The realtor says = .*@#$ "The building is below grade and basically requires a full renovation of plumbing, roof, electrical, etc.*@#$ The owner is asking $40,000.*@#$ Please let me know what other questions you might have.*@#$ Thank you."

I have no idea what questions to ask. I have the ability to do all the work myself; but I don't think that's possible if it needs to be up to 'code'?

Also they've mentioned owner financing. What kind of offer is realistic?

Sorry to sound so green; but it is what it is.

Any advice is appreciated.

 

[LifeLongWNYer]

The first thing that scares me, and is a show stopper in my mind, are the words "below grade."

Not knowing the "lay of the land" I would be in no mood put put my valuable tools and vehicles in a site that could become flooded in a uncontrollable situation. I'm in New York state, but I remember reading about something in New Orleans called "Katrina."



.

 

[Stuart in MN]

Not sure I understand what the realtor means by below grade - I looked the building up on Google Maps and it's at the same level as every other building in that part of town. Are they referring to it being in a flood zone? I suppose you have some specialized regulations there, especially since Hurricane Katrina. The neighborhood looks a little grim, but then again it's mostly warehouse so that's to be expected, I guess.

 

[lisiecki1]

Maybe "below grade" is the realtors way of saying "doesn't meet code".

 

[wnstwolf]

I would search out your locl code enfocer. I looked into a spae in Philly that I wanted to have shop on street level and thn live up in the upper two levels. Issues:

Banks consider it a commercial property so you need a commercial loan which usually carries higher rates than residential (may be ok if you go through owner?? that has it's own issues)

Insurance may be higher

Even if your using it for private use the local code guy may requie it to be commerical code which as the deal breaker for me as I would have had to upgrade the sprinkler system and I could not afford that at the time

Like Jim stated that below grade thing is scary. Notsure what part of your area is not below grade but that is scary..

 

[BRIANBB]

The realtor says = .*@#$ "The building is below grade and basically requires a full renovation of plumbing, roof, electrical, etc.

This reads to me that it requires work to be brought up to code. If it were below grade as in elevation then it would be below street level or the surrounding land level. It needs work, thats all.

 

[BRIANBB]

Might as well move your sailboat to a location that the landmass you depend on for storage and supplies is above sea level by about 20ft, not below sea level.

 

[PugetDude]

Maybe "below grade" means you could sail up to the front door after the next big one.

 

[HoosierMark]

It may be a great deal but without an inspection to determine what it needs to be code compliant, how its ground height relates to flood levels and the actual market value of it, any answer is only is only speculation. Ask the Realtor how the price was set, did the do a CMA (Comparative Market Analysis) on it to determine the market value, has it been inspected? Does it have any city work orders on it that need to be complied with? If you are only going to store things there, you may not need water or electric, but the roof is a must. Get some estimates on bringing it up to code and usability, then have an appraiser or knowledgeable person determine what the value would be if it were in good shape. Now subtract the cost to upgrade from the value it will be worth and you will have an idea of it's current value. Plus deduct some for your time and the risk that something was missed in the inspection. The net value will give you a pretty good idea of the current value.
You still need to consider the flood issue and if you want to accept this risk for a long term. You also should check with an insurance professional to determine what you costs will be in this location.

These would be the first steps I would take if I could find a building like this close to me.

 

[35chevy.com]

You can go to the FEMA web site and look up the address to see if it is in a flood zone. When you find out what zone it is in it will show something like "9AE" or "12AE" etc the important part of the code is the numbers don't worry about the letters. For example in a 9AE flood zone there is a 1% chance in any given year that you could have a flood where the water level could reach 9 feet and a 26% chance of the water level reaching that level in any 100 year time period. The FEMA Code is called a BFE...Base flood elevation


The city may have a survey or a flood certificate that could tell you the elevation of the property (building) either above or below sea-level. If the ground floor is above that's better than being below.

Gary

Gary

 

[kd3pc]

The city may have a survey or a flood certificate that could tell you the elevation of the property (building) either above or below sea-level. If the ground floor is above that's better than being below.

Gary

Gary

From an ex-liveaboard to a current one:

getting a "flood insurance" quote will be quite enlightening. My home in Roanoke, VA (think Mtns) is in the flood plain of a small creek - you can step across it, and yet has never flooded since it was built in the 1970's, and with the new noise by FEMA to make owners pay for some sort of real insurance, as well as re-jiggering the maps - my rates have quadrupled in the last year...from just under $600/yr to over $2400/yr

add flood insurance to your taxes and you paying a LOT.

I would look elsewhere, especially if your goal is to protect your belongings.

 

[petveedub]

It may not be relevant to you, but I would check into 3 phase power. Most of the tools I want or have need it, and being light industrial might make it easier (cheaper) to get. Just depends on your intended use.

Also, I wouldn't mind hearing (reading) about living on a sailboat.

 

[crf731]

I suspect that below grade means that it is below sea level, as is a lot of the area there.

According to this map, there was 6-8' of water there after Katrina.

http://danswenson.com/paper/katrinagraphics/02how-much-water.pdf

 

[53 hemi]

Hey everybody, I appreciate sll the responses so far!

I'm working offshore and haveca few weeks before I'm back in town.

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[nolimits76]

Here are my general thoughts and observations:

1. Below Grade. As others have noted, you need to evaluate what "below grade" means. You can bring any property up to code with enough resources and/or time, but you can't change the location. If it's a known problematic flood area, I would probably pass as the one thing you can't change is your location.

2. Owner Financing. The fact the owner is willing to finance tells me one of two things. Owner is smart enough to realize they won't get asking price with a traditional loan setup, and doesn't need the cash flow so they are willing to do the loan for a higher amount and (probably) higher than market rate. The other reason could be that as-is the property will not qualify for mainstream loan programs.

3. Ask vs Sell Price. If you can live with #1 and done your research to conclude you can self perform the repairs/upgrades to bring to code, then there might be an opportunity to buy very cheap. Having cash might be helpful. I haven't chased these types of properties but I've heard others that have. It doesn't seem uncommon for the owner to ask $30k and a buyer offer a stupid low number like $10-15k cash. Really at the end of the day it comes down to risk. Your price should take into consideration current market prices for similar properties that require ZERO work. Then the $ amount and time of work you would have to self-perform and/or hire out. Remember, I said time! Your time to self-perform or coordinate work is worth dollars in the end. Don't underestimate that part. Finally you need to make a profit for taking on such a project. When you factor in everything, the $10-15k offer (or less) may not seem as crazy. And if it's been sitting awhile chances are others came to similar conclusions, so be patient and get the right deal or walk.

 

[mygarageone]

Nothing too add but do wonder why the taxes are so high on a building of that value ?
What justifies that tax rate ?
It just seems high for it's value . I owned a 30 x 70 in a nice area and the taxes weren't near that high. Not even half ?

 

[themiller]

I suspect that below grade means that it is below sea level, as is a lot of the area there.

According to this map, there was 6-8' of water there after Katrina.

http://danswenson.com/paper/katrinagraphics/02how-much-water.pdf

We have a winner.

 

[nolimits76]

Nothing too add but do wonder why the taxes are so high on a building of that value ?
What justifies that tax rate ?
It just seems high for it's value . I owned a 30 x 70 in a nice area and the taxes weren't near that high. Not even half ?

First, commercial taxes are higher based than residential taxes.

Secondly, tax rates vary greatly by location. Unless you live in the same area, it may be unfair to make that statement for this reason.

 

[Garage Dog]

Some good suggestions above, here are a few more thoughts:

1. People often make a mistake by justifying the purchase of a property or the price they are willing to pay by saying; "I can do the work myself", essentially valuing their time at zero. Find out what it would cost to have the work done by professionals to bring it up to code, then use those bids as a negotiation tool.

The current owner may have figured out what it would cost to have the property brought up to code and then determined that it is time to sell.

2. Owner financing - this can be called different things in different states. I am only familiar with a Contract for Deed (MN) or a Land Contract (WI). The point is that owner financing does not provide you with the safety net of a traditional mortgage. In some cases if you default, 60 days later the previous owner can have his property back and you have lost any money invested...

3. If the current owner has owned it for a while, you should be able to go back in county records and see how much they paid for it. It would be nice to know if they paid $5K after Katrina or $50K before Katrina. Another potential negotiation tool.

4. $4,000 in property taxes on a $40,000 property? I have never heard of a 10% mill rate. I would look into this further. If that is really assessed properly, how much will the taxes go up when you bring the place up to code? I have had a city increase my valuation 3x what my renovation costs were.

Between initial repairs, property taxes, flood insurance and on going maintenance it seems rather expensive to own for a property that could be under 8' of water again even without a mortgage...

You have a lot of research and due diligence to complete before you can determine if it is any sort of deal.

Just my 2 cents.

Good Luck

 

[rsanter]

How old is the building?
Some older bring buildings have no additional,reinforcement and will crumble,in an earthquake or ground shift
What is the condition of the roof structure? If it needs a new roof and has been leaking it may need more than just a new roof.
What would the value ofnthe property be after all repairs are made?

Bob

 

[jake00]

Illustration of below grade http://www.findanyfloor.com/Climate/ClimateFriendlyFlooring.xhtml

 

[volleyball]

I think guessing is the wrong way to go about this. I would ask the realtor what he means by any comment. That way you will know. "I meant" or I thought you meant" does not hold up well in court.
Go back with a contractors estimator to give you a rough estimate.
you will then find out the repair cost against what maybe a new building would cost.
Owner financing may mean that the owner doesn't need the cash and you paying them interest is better than a bank would give them. More likely is that a bank will never finance that death trap so owner financing is the only way.

 

[mmack66]

I'd be concerned that the realtor used so much profanity when talking about the building.

 

[BJ42LX]

Google street views shows the building with a for sale sign on it back in April 2011. I'd think the seller is motivated after all these years...

 

[c39er]

$4000.00 a year taxes for $35,000.00 flood zone property=move on.

 

[RVDan]

Yes the $4000 a year for a $35000 property seems really high.

Realistically I might consider it though, around here a property like that would be ten times that price with property taxes to match.

 

[kbs2244]

The whole city of New Orleans is “below grade.”
In fact it is below water level.

But that seems pretty big for just parking and tool storage.
Would you be doing big projects as well?
How far is it from your boat?

I would look around for a smaller, cheaper, and closer place before I spent any money.
Maybe rent a spot to see if it the way you want to go.

 

[53 hemi]

Thanks again. I've got eight more weeks out here before I can check it out in person. Im compiling a list of things to look at and ask about.

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