Broker Eric Andrews owns buildings in downtown Pittsboro and goes over buying opportunities and how this Commercial Real Estate process works.
Speaker 1: What should people know about buying property in downtown Pittsburgh?
Speaker 2: It’s rare. You don’t get the opportunity to buy properties in downtown Pittsburgh very often. It’s such a tight little community that there are rumors about that a property may come up for sale, or somebody thinks that someone’s going to sell, and when that happens, people are just, they’re knocking on the doors quick. It’s a rare occurrence. I’ve purchased, myself personally, five properties in downtown Pittsburgh and all five of the ones that I bought had not hit the market. It was a rumor and then you had to investigate and see whether or not those people were really actually interested in selling. And then you have to figure out why they’re selling. So it’s not always about money and who’s going to pay the most, sometimes it has a lot to do with terms.
When I bought the building that we’re in now, this was Brenda Carrolt, Charles Carrolt’s sister-in-law, and it was a bookstore, and when I made my offer, four other people made an offer at the same time. So I was one of five offers and come to find out I wasn’t even the highest offer. I mean, there were a couple offers that were 20, 30 and $40,000 higher than mine. But when I called Mrs. Carrolt, this was a bookstore and she had it loaded with books. And I said, Mrs. Carrolt I understand that, you’re shutting down the bookstore, it’ll probably take you a long time to get your stuff out of there. I’d like to purchase the building within the next month and you can take as long as you like to get your stuff out of there. And it took her nine months so it was an expense to me, but out of all those offers that she had in front of her, she chose mine because of those terms.
So that’s one of the things you need to know about buying property in downtown Pittsburgh, why is somebody buying? And like I said, it’s very, very rare. And one of the most difficult things that I have explaining to buyers is that they are buying the right to buy. And that is a concept that people do not understand. So I’ll just take this building in a for instance or whatever. So this building, the tax value is $350,000. There’s no way I would take 350 for this building, 350 would be cheap for a building of this size, downtown Pittsburgh. It probably has a market value or an appraised value of 425. If we got four or five people that came around, appraisers, they would probably put a value of 425 on it. I’ve been offered 600 on it. There’s no way I would take the 600, but that is so inflated over what it’s actually worth because people are buying the right to buy.
So you have, in buying a piece of property in downtown Pittsburgh, you have to know that you’re probably going to pay above market value. You’re going to pay above and beyond, because they come up so rare, one of the things that you’re paying for is a premium to be able to buy it. Well, I mean, downtown Pittsburgh is a very limited space. There’s only so many lots and buildings available and they have done very, very well in appreciation. They continue to go up in value. So if they’re not going to appraise, you have a couple options. You’re either a cash buyer. If you’re a cash buyer, you don’t care about appraisals so much. You still want to make good sound business purchases, but you don’t want to pay so far above, but appraisal’s not a huge issue with you.
If you do need a loan and an appraisal to make the purchase, sometimes the lender will let you make up the deficiency. So we had a situation in one property, the purchase price was 285. It appraised at 250, we had to make up the deficiency, $35,000 out of pocket. It was an 80-20 loan, so we had to put $50,000 down, but then we had to put another 35,000 down on top of that. And some banks will or will not let you do that. And then the other thing too is sometimes the sellers will hold the note. So if they’re willing to finance it themselves, put 20% down and then make payments on it, then it doesn’t matter if it’s going to appraise.
But I’m pretty sure, well, I’m positive in the 21st century, I’ve sold the most in downtown Pittsburgh. I’ve probably sold about three or four million worth of property in downtown Pittsburgh, probably about 15 different properties. But I would say that all of the buyers that I’ve had are certainly happy with their purchases and the rents have worked out for them well or whatever. But at the time that people made, I mean, there are times, I bought my first one, probably 10 years ago. And I know I got laughed at, people said that it was too much and it’s probably doubled or tripled in value since. So there’s a lot to know as far as buying property in downtown Pittsburgh. But the main thing to walk away from is you are buying the right to buy.