Seeking Opinions on $600K Renovation CRE Project, thank you in advance
I inherited a $4MM commercial property with no tenant atm. 

* Prior to pandemic we were got offers to sell for $4MM.
* 2 Years later, no tenant, with offers to sell at $2.5.

I decided to build a food cart pod with 16 parking lot stalls to rent at $1500 each for $288K in revenue.

Cost will be about $300K for food cart parking lot expansion.  
Plus another $300K to renovate existing small restaurant into a taproom due to damages.  
Hoping to collect $150K annual revenue for that.

At this point, estimated costs are:

* $6K Architect
* $5K Surveyor
* $1-2K for plumbing drawings.
* Operating costs for food cart pod will be around $150K for utilities, security, insurance.

All in All, I didn't expect to fork out $13K just to submit drawings to the City.   
Is this still a good idea to proceed? 

I know commercial property is picking up, but it's nowhere near pre-pandemic levels. The alternative is to shell out $500K to a small restaurant for repairs + TI and collect $150K annual revenue.

What should I do?
[{"id": "hks9e1q", "text": "Sell", "replies": [], "depth": 1}, {"id": "hksj5s1", "text": "Reach out to the buyer(s) who offered $4MM and try to sell.", "replies": [], "depth": 1}, {"id": "hkslrhn", "text": "It sounds like a solid plan. Do it in stages so that you can use operating income from the first stage to fund the next stage.\n\nGet that sucker partially or fully leased up and then see what you can sell it for once those leases are stabilized.", "replies": [{"id": "hksmd58", "text": "Thanks for the encouragement. U have any similar experience? What about construction advice?", "replies": [{"id": "hkt9gg3", "text": "Your construction expenses seem very low. Specifically soft costs.", "replies": [], "depth": 3}], "depth": 2}, {"id": "hkun96h", "text": "This makes sense to do the restaurant first then the food carts later. What doesn\u2019t add up is that OP says 500k into the restaurant would yield 150k annual revenue but also says elsewhere in the post that 300k would yield 150k revenue. Is this because some of the work overlaps between food trucks and restaurant?\n\nEither way, priority should be leasing the restaurant and then considering food truck idea", "replies": [], "depth": 2}], "depth": 1}, {"id": "hksnnpm", "text": "*\"I inherited a $4MM commercial property with no tenant atm.*\n\n*Prior to pandemic we* *~~were~~* *got offers to sell for $4MM.*\n\n*2 Years later, no tenant, with offers to sell at $2.5.\"*\n\n^((You inherited a 2.5 million dollar property).)", "replies": [], "depth": 1}, {"id": "hksrhbc", "text": "SELL. \n\nThis food cart fantasy will be your demise.", "replies": [], "depth": 1}, {"id": "hkswiei", "text": "How did you do your market research to think you could rent 16 food spaces?", "replies": [{"id": "hkt41i5", "text": "visited different places, talked to owners, etc.", "replies": [{"id": "hkt9e0w", "text": "I know you probably don\u2019t want to hear this but you need to listen to the advice to sell.", "replies": [{"id": "hkumslv", "text": "out of curiosity, what would be a right answer to that question?", "replies": [{"id": "hkw468o", "text": "You looked at 5 other similar properties and they sold for less than your cost (opportunity cost of sale and cost of construction and a health safety margin).\n\nOr if you saw recent sales of similar properties.\n\nCall owners of similar product and ask if it is for sale or if it is not in your area meet with them.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hkt6vhs", "text": "What is your rate of return based on the sell value including your improvements?\n\nSounds like it will be around 5% after expenses. Plus risk and work. If that's the case, it's not worth it.", "replies": [], "depth": 1}, {"id": "hktcakc", "text": "You need to find a partner you can trust that can not only identify highest and best use for the property but can also plan and execute the business plan for you.  \n\nMy partners and I salivate over off-market deals where there is an inexperienced seller/owner that \u201ccame into the property\u201d\n\nYou likely have someone in your network you can trust that can connect you with the right people that won\u2019t do wrong by you.  \n\nGood luck.", "replies": [{"id": "hkvtu4v", "text": "Your partners and you salivate when inexperienced owners sell right? Assuming that's where you get involved as a broker/developer?", "replies": [{"id": "hky5fx1", "text": "I broker deals, invest personally in the ones where I see the most upside and also do development consulting for companies that are short on experienced staff and/or owners that don't know what they're doing.\n\nDepending on the deal, I get involved at any number of points in the process.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hkugudc", "text": "You're not going to get away with spending no money on your concept, but you could get ahead by putting together some renderings and a site plan with the goal to pre-leasing your spaces. Your pitch/concept book will cost but can be utilized before approaching the city. \n\nMaking headway on addressing the vendor's concerns and locking them in ahead of time might help establish if you are in a good location and there's really a market there rather than something that you just think might work. It will also help you address lenders concerns if you are utilizing 3td party financing for the project.\n\nAlso consider creating a real outdoor experience with a beer (microbrewery?) and/or wine vendor with some sort of entertainment component. You'll need to drive traffic to the site with workers during business hours and leisure customers at night.\n\nLast see if the city has a cheaper conceptual drawing review vs a full plan review process.", "replies": [{"id": "hkvvrkd", "text": "The location's good, used to be fast food. Not too many food options in the area. \n\nYes, I plan to have beer and a taproom. \n\nWould you recommend using fiverr for renderings? I have a site plan draft from the architect already. \n\nThe city's review process shouldn't be too costly right? I know I'll have to pay for system development charges.", "replies": [{"id": "hkvwleq", "text": "Cool, you get what you pay for on Fiverr. \n\nYou might upgrade a little and check Upwork. For design you won't need fluent language speakers so you could find high quality, non agency international talent that are cheaper or trying to build their design portfolios.\n\nIn terms of the city's costs, I don't know. Have you gone down in person to the planning and Econ developmemt departments to talk to them about your proposal?", "replies": [{"id": "hkvwr65", "text": "Yes, I've scheduled meetings with them and got permit and SDC fees. It's definitely expensive.", "replies": [{"id": "hkvxov9", "text": "Great. Sounds like you have a handle on it so far. Not much you can do about a particular City's fees except perhaps delay paying as long as possible util you pass you project go line or perhaps working with an expeditor or city council lobbyist to give you more insight on the inner workings and help push things along with the key players and gatekeepers.", "replies": [{"id": "hkvy89s", "text": "Thank you. May I ask what you do or how you know this stuff?", "replies": [{"id": "hkwfabg", "text": "I'm in CRE. Investor, asset manager and financier. We have been exploring a business plan similar to yours.", "replies": [{"id": "hkwinh5", "text": "awesome. most ppl in CRE say to lease it to a franchise, it's simpler and safer. I thought I could make more money if I built something, but i'll find out soon.", "replies": [{"id": "hkwweno", "text": "The world needs visionary people willing to take risks and who have the resources to pull it off, so go for it!", "replies": [{"id": "hkwymjv", "text": "man, you are inspiring. please let me DM u for advice and run things through with. Lord knows I need it.", "replies": [{"id": "hky08wb", "text": "Sure, drop me line. We are just getting into buying a couple of properties so if I dip out and don't answer, I'll get back to you asap.", "replies": [], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hkuj0lo", "text": "It would be a lot more with a tenant in place. Why haven\u2019t you been able to lease the restaurant space?", "replies": [{"id": "hkvvzoh", "text": "Restaurant would cost 400K in renovations plus TI. Annual Income would be $120K.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hkup3hv", "text": "Big project to jump into without prior experience. Not saying it can\u2019t be done, but I\u2019d enlist an advisor, mentor, partners, etc to increase chances of success. Is a food truck parking lot the best use of the space? Usually you see one food truck parked outside a bar not 15. Could there be a better parking lot space somewhere outside of the city where truck owners pay less? Are you able to get commitments to fill the 15 spaces?", "replies": [{"id": "hkvvtmp", "text": "Would you recommend BuildZoom?", "replies": [], "depth": 2}], "depth": 1}, {"id": "hkuz5mj", "text": "Rent the property out. \n\nSell the property.\n\n1031 Into something else\n\nDont over leverage\n\nStay away from this food cart idea.", "replies": [], "depth": 1}, {"id": "hlfoea9", "text": "I used to run the a city division of a national parking operator and now I have a parking consulting business. I've done stuff like this before though I must say 16 is very ambitious.  \n\nThe food cart business is a rough one in the best of times. If you have no tenant where do you see the traffic for your food carts coming from? What are the other traffic drivers in the area? A plan like this you need to approach from you tenants eyes and what makes a spot appealing for food carts is consistent repeatable traffic. You need to develop that pitch and try to get at least half of your spaces preleased, if you can't you may not have enough traffic or you may be asking too much for the space. Have you done a rate survey of the area? Where are you getting this $1500 a month per space idea from?", "replies": [{"id": "hlfoqmu", "text": "It seems to be the competitive rate in Portland food cart pods.", "replies": [{"id": "hlg06r0", "text": "Ok so you've looked into the rate. Are these food cart pods at similar types of properties to yours in similar numbers? What are your drivers in the area? Tourism? Nightclubs? Churches? Stadiums? \"Old town\" strip?  For 16 food carts to be successful you are going to need hundreds or thousands of people coming everyday so where will they come from?", "replies": [{"id": "hlg27he", "text": " it used to be a mcdonalds so there's traffic.", "replies": [{"id": "hlg5w68", "text": "I certainly understand that MCdonalds are often near good car traffic but unless you have a giant unused parking lot, what you need is foot traffic which is very different. Additionally, I would say the amount of traffic you need for 16 food carts is at least an order of magnitude more than for a Mcdonalds because they are basically 16 different businesses. I would double down on researching who and quantifying the foot traffic to see how many can be supported. \n\nIf the area is truly high demand you could also reach out to parking operators in the area and see if they will lease it from you for a certain amount, or you could see if they are willing to partner with skin in the game on your idea and that will tell you very quickly if it is a viable one or not. They might be able to assist you with setting up a mixed use say 5 food carts, 12 EV charging stations, and an EZ Mart in a shipping container (of some kind of setup like that).\n\nGood luck!", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]