A Hilliker client sold a $1M retail building and needed to identify a replacement property to defer capital gains. We sourced an income-producing asset priced below market, though with a shorter remaining lease term. Worth a closer look. As diligence unfolded, the story changed:
- Environmental issues surfaced: manageable, but not insignificant
- The roof required full replacement, with bids coming in 150% above initial estimates
- Structural concerns emerged during inspection, requiring foundation repairs
- What appeared to be a metal and block structure was actually wood-framed, potentially triggering costly sprinkler requirements for a future tenant
- Electrical systems were largely original (60+ years old) AND
- Conversations with neighboring users revealed prior flooding during heavy rains
The survey came back clean but the risk profile did not.
What initially looked like an opportunity quickly revealed itself as a long-term liability that could have tied up the client in costly repairs and uncertainty for years.
After 45 days of diligence and $6,500 in upfront costs, our recommendation was simple: walk away.
We then secured a one-year-old industrial investment property with a 9-year NNN lease allowing the client to complete their exchange with confidence.
Sometimes the best deal is the one you don’t do