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A broker in Dallas told me to walk away from a 12% cap deal, and I still can't decide if he was right
Last week I was looking at a small strip center in Dallas, 8 units, asking $1.4M, and the seller's numbers showed a 12% cap which seemed too good to pass up. My broker pulled me aside in the parking lot after the tour and said flat out "if the cap looks that good, something in the leases is lying to you." He was right that two tenants were on month to month deals and one had never paid on time in 14 months. But here's my problem, sometimes those messy deals are exactly where you make your money if you're willing to do the work. So which side are you on, do you trust the broker who says run, or do you take the risk and fix the mess yourself?
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kim_sanchez196d ago
My buddy bought a strip mall like that in Garland back in 2019. Two deadbeat tenants, one space had been empty a year, cap looked like 13%. Took him 8 months and about $60k in lawyer fees and buildout to get it stable. He did real well on it but he also told me there were nights he could not sleep wondering if he just lit $200k on fire. Took him two years to see a dime of profit. That broker is not wrong, just depends if you got the cash and the stomach to ride it out.
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