The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.
One of the most expensive mistakes often made in commercial real estate investing is assuming any building you buy is going to lease. A building that can’t seem to lease is a building that is practically worthless, and you will be sitting on a vacant space while paying the mortgage for an undeterminable amount of time. When you see a vacant empty building, talk to brokers and professionals in industrial commercial real estate and ask why they believe the building hasn’t leased. When you ask, they’ll be happy to tell you what they know.
Richard Wilson: What is the most expensive lesson you’ve learned, or watched somebody learn, the hard way that could easily be avoided?
Robert Borris: I’ve seen people buy stuff you couldn’t lease. If you can’t lease it – there’s two things really – if you can’t lease it it’s not worth anything. You’ve got to put stuff in the buildings, you’ve got to – and the reason why they weren’t paying attention to why the building couldn’t lease. Industrial buildings don’t lease for functional obsolescence, they don’t lease because driveways aren’t wide enough for tractor trailers, I once saw a warehouse project where you couldn’t get a tractor trailer in the trailer court at all, or you couldn’t get access, or there are problems that if they would’ve asked somebody, even a broker industrial broker, they would’ve said. Here’s a good item, if a building is empty and you’re looking into buying an empty building, call up 2 or 3 industrial brokers in the market and say “I’m buying, I’m thinking of buying this building…” I would actually have the building under contract before doing that, to be honest with you. “Why hasn’t this building leased?” and let them talk, because they’ll tell you. So, you’ve got to ask them.
Richard: Right, yeah, I think that’s super helpful I appreciate that.