Distressed commercial property potential owner
Hello all,

New here but looking for opinions and advice. I'm about to submit an official offer on an already verbally accepted offer for a distressed commercial property. I have to capital to buy outright and part of the deal is that it is cash with quick close. 

The property was originally offered on the open market for 250k. This would be a good price if it wasn't in terrible shape. 

The building is a late 1800s 3 story brick building 15-20k square feet within 5 miles of downtown. The city has approximately 600k population mixed urban rural. It has another 10-15k sq ft of metal accessory buildings for a total of 30k sq ft altogether. I'm not sure on the official ratio. 

The bad: the roof structure itself needs to be replaced and it's been raining into the building. Its been estimated this will be a 90k-120k repair. All the metal accessory buildings are shot and need to be torn down, but the concrete base is good so new metallic buildings can go up on same foundation. The entrance to the building is the original wooden plank loading dock/porch thing that also needs gutting/replacement. 

The current owner bought at auction for 40k plus commissions/fees etc. They didn't want anything to do with my offer of 75k but due to covid affect on the market now they want to accept. 

I think this is the price it should have been a couple months ago but need opinions and advice about insurance and construction loans during economic times like what were now in. Any pitfalls I need to watch out for etc?

Thank you in advance.
[{"id": "fl1wwqd", "text": "When did the current owner purchase for $40k?  If it was in the last few years 75k may be too expensive anyway.  \n\nGeneral advice is expect your buildout to cost twice as much as you expect.   If that doubled buildout cost still gives you the ability to get a cap rate above 6% it might be a good play.  Personally,  I would wait another 2 weeks at least to make any offers to buy.   Things are going to get much worse and many owners will look to sell as a result.", "replies": [{"id": "fl207kv", "text": "He purchased at the end of 2019. So it hasn't been very long. My initial offer was maybe a week or two after it was originally posted. Building out the entire complex would be far more than I can afford now. I'm looking at this from the perspective of running my own business out of it as well as living above it.", "replies": [{"id": "fl2fku9", "text": "What\u2019s your business and what market are you in?  $75k seems cheap for that big a building so there must be something seriously wrong with it if it only auctioned for $40k", "replies": [{"id": "fl2hr89", "text": "I've got a structural engineer coming out to inspect to make sure the walls are solid and floors can handle the load for doing mixed office residential on top floors. It is seriously in need of a roof. The structure of the roof itself is about to collapse and the metal accessory buildings cannot be salvaged. I believe this, along with it being a rough neighborhood that has not experienced gentrification is contributing to its low auction price. \n\nOur current project company is DIY motorcycle/ coffeehouse. Our other short term plan was leasing out chain link fenced spaces for storage with the extra square footage.", "replies": [{"id": "fl2ocyf", "text": "Interesting, that sounds like a pretty good plan but I would suggest staying flexible with the use and maybe focus on one of those things.  Don\u2019t want to be a master of none.   \n\nId get a contractor out to give you an estimate on the roof repair.  You can use that knowledge in negotiations.\n\nPm me if you want to discuss more.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "fl2fpzb", "text": "You should make sure to appraise it and inspect it before signing anything but this could be a great deal.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fl2uk6k", "text": "The metal building portion may no longer be an excepted building material for that area. Check with the city to confirm that you can rebuild. Also, most cities require everything be brought to code if empty for a certain amount of time.", "replies": [{"id": "fl3j6el", "text": "Thank you for that advice!", "replies": [], "depth": 2}, {"id": "fl3qom0", "text": "&gt; excepted \n\naccepted  (the officials / rules  accept it)", "replies": [], "depth": 2}], "depth": 1}]