Last week we became the owners of some new keys. And the two little buildings they belonged to. It was a long road to get there, and we learned a lot along the way about buying a commercial property.
It’s sometimes hard to figure out which is the right property to buy. In my last blog, I described how we decided this was the right time for us to buy a commercial property. In this blog, I’ll share how we picked the right property for Swallowtail.
Defining the Wants
As an architectural office, we wanted three things:
- First, we wanted a property that was centrally located.
- Secondly, we wanted a certain kind if space, either a converted old home, or a loft with a high ceiling, or a converted old industrial space. It needed to be cute enough or interesting enough to be an architect’s office. It didn’t need to be completely ready to move into, but it did need the right ‘bones’.
- We are a new company and our budget was modest. Price mattered.
On our not required, but It-Would-Be-Nice List we added two more things:
- A second suite that we could rent.
- Expansion possibility, either into the second suite, or with an addition.
Checking out the Options
Over the past few years we would go online every 3 or 4 months and check out what commercial properties were available. We would spend several hours looking at all the listings within a 15 mile radius of where we wanted to be. We wanted to know the relative costs between different listings, and we wanted to see how often our kind of property became available.
When the interest rates and the property prices seemed to be at their lowest we started looking more seriously. We asked our Realtor to send us listings that matched our criteria. And we started taking the long route to all of our meetings, so we could drive past listings, or drive down streets we liked to see if there was a ‘For Sale’ sign. Then we found a loft condominium office for sale over looking the Square! We made an appointment to go take a look!
Looking at Properties
We were thrilled! An office condominium on the Square was exactly what we wanted. On paper. But when we looked a the condo, the smallish space was not laid out very well for our needs, and only half of the space had windows. The ceilings were not really high enough to be called a loft although they were higher than average and 2 of the rooms had wood beams. But it did not feel like an architect’s office and since it was so small, we would have very little time before expansion would be an issue. And when you added the regime fees, it was too much money with not enough architect-office feel. Strike that one off the list!
Then our realtor suggested we look at a little house, just off Main Street. It was on a street transitioning from residential to commercial, and this house had a cottage in the back. It had been on the market for a few months, and the Owners had just dropped the asking price.
Our realtor thought it was not selling because the cottage did not show very well, and it needed a lot of work. Our realtor said most buyers don’t have the expertise, or the interest in taking on A Project, and most people can’t imagine what it could look like after a renovation. They just see the old fashioned bathroom, the stained carpet and sagging floors, and walk away. The Owners were hoping the price reduction would temp a buyer to take on the amount of work needed.
We drove by. It looked good enough to ask for a showing.
Looking at 814 N Cedar Street.
We liked what we saw!
The property had been a residence, and was now for sale by the now adult children of the couple that built the home and the cottage in the early 50’s. Both the main house and the cottage are small, as were many homes built at that time. But they were each bigger than the office condo and they would work for us.
Main House
Back Cottage
The main house has 2 bedrooms with a very large living room and a very large kitchen. The kitchen has lots of windows and all of the rooms, except the kitchen, have original wood floors. We liked the wood floors (nicely protected by carpet in the bedrooms), and the amount of windows in the very large kitchen. We thought we would make the kitchen an office or a meeting room. And it looked cute!
The cottage is right at the back of the property, and standing in the screened back porch, you feel like you are in a private forest. It has a large living room, with one bedroom at the front. An old porch was enclosed to make two very small rooms at the back. The cottage does not show well, and it needs a lot of basic repairs, but it is in a nice location on the lot, and has great original wood floors hidden under the carpet.
Would it Work?
When we first saw the property, we saw Swallowtail’s office in the main house, and imagined renting out the cottage as a short tern residential rental unit. We thought it would be great to move our office into the main house with relatively little work, and since we have an abundance of antique furniture, we thought we could create a very nice furnished rental unit in the cottage.
We went down our check list. We had a tick in all of Want categories as well as the It-Would-Be-Nice categories.
Would it work? Yes! We thought this property would be a good fit for Swallowtail, and knew we could use our skills and contacts to renovate the cottage. We decided to make an offer.
What Happens in Due Diligence?
What happens after you make an offer and all the things we considered in our due diligence period is the subject of our next blog. Some of the things we looked at included:
- building inspection
- termite inspection
- survey of the property and verification of it’s legal description
- appraisal
- environmental report
- preliminary design and cost estimates
- feasibility study
- obtaining a loan