Loan on old big box stores | Think about real estate


Depending on your financing and experience, these properties can be good investments.

Before the 1970s, Americans shopped downtown. In rural towns and urban neighborhoods alike, the businesses and professional services everyone needed were all lined up in a neat, walkable row. Most of these buildings were multi-level, with shops and offices on the ground floor and residential units above. This was the time when mom-and-pop stores were thriving and Main Street had it all. Ironically, some of today’s costliest urban developments bear a striking resemblance to that ancient era.

Then came the mass superstores. Convenience reigned supreme during this time. Large-area buildings drew the masses away from city centers to the outskirts of the city. Malls and large retail stores offered a variety of product selections and wholesale prices that consumers had never seen before.

Then came the era of Internet shopping. Even dinosaurs like me who say they hate the computer have to admit that they do shop online from time to time. And who can blame us? We can sit on our sofa and buy anything while comparing products and prices from all over the world. The best part is that our purchased items are shipped right to our doorstep. This new form of shopping has left a huge void in its wake.

What do we do with these huge buildings when they darken?

We lend them. We’ve discovered developers who are good at reallocating large spaces, and we’ve found it to be a very profitable strategy for everyone involved. I’ll be the first to admit that these projects are not for the novice investor with little money and little experience. But for investors who have both, the potential is limitless.

For example, we recently lent on two large former commercial buildings. One was an old Sears building that was remodeled into a 95,000 square foot gym. The other was an old K-Mart building that was turned into a cannabis facility. One of our borrowers even found a vast old brewery, near the coast, which has long since been forgotten. He transformed it into a parking garage for the cruise terminal, a six-story self-service storage space, a rooftop event center and a 98-room hotel.

These few examples show that tall buildings still offer value, even though they will probably never be used in the same way again. Their wide-open designs provide a blank canvas that can be easily converted into offices, trampoline parks, go-kart tracks and a host of other uses. It’s time to think outside the box!

I learned a lot from lending on these projects and watching our borrowers go through the process to complete the project. If you are considering such a project, it is important to look around to see what is missing. Consider several strategies when breaking down the building into smaller spaces. For example, consider condos for retail space. And above all, buy in depth! These construction projects have more zeros and the costs will add up quickly. Make sure your borrower bought the building at a low enough price to cover costly surprises – they are sure to come up.

If you have questions about a redevelopment project and aren’t sure if it’s right for your lending style, don’t hesitate to contact our team at Investor Loan Source.

Tom Berry is the co-founder and CEO of Investor Loan Source. Since 2007, Berry and his wife have amassed a portfolio of over 400 properties, including homes, apartment complexes and commercial properties.

Berry is dedicated to helping other real estate investors pursue their dreams of financial freedom.


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