No one talks about commercial real estate

Investor · Los Angeles · Member since 2020 · 5 posts · 5 votes

Commercial Real Estate Investment > Residential

Many co-workers/friends (upper-middle class) invest in residential real estate to rent out and do airbnbs or furnished finders. But, no one I know is in commercial real estate. When I talked to my friends about it, most people just don't know how to invest in commercial and the upfront capital is deterring. I did some research online- looks like there's very limited information on CRE online as well.

I’ve found info regarding Triple Net lease and the industrial asset class seems amazing. The returns are insane in both appreciation and passive income compared to the current residential where I’m seeing 2-4% cap in CA or TX. Any other good materials y’all got for breaking into commercial real estate investing?

Here are videos I’ve watched so far on commercial real estate

How real is this deal? I’m guessing it’s very rare since there’s a video on it. For people getting in commercial what are some returns people expect?

Any other resources y’all recommend for commercial real estate?

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Mordy Chaimovitz

Investor · Chicago · Member since 2022 · 128 posts · 85 votes

I work with a lot of people that are transitioning from residential financing into CRE financing.

Here are some of the little-known facts that are important to be aware of, and catch a lot of investors by surprise.

1. Most lenders will require a borrower to have assets equal to the loan amount.

So if you were making a 10MM dollar purchase/REFI, with a 7.5MM dollar loan amount. you would need to have a net worth of 7.5MM Dollars!

2. You can partner with someone and combine each other's net worth to reach the loan amount, as long as your partner will have a 20% share in equity or more.

3. The borrowers will need to have 10% of the loan amount in liquid assets post-closing for reserves.

So in our example of a 10MM dollar purchase you need to come up with 2.5MM for the down payment plus closing costs, then still need 750k (10% of the loan amount) of liquid assets for reserves.

4. there are very few lenders that can lock you into a rate early on in the process. your rate will only lock after you have submitted all your documents to the lender, and they have approved your loan

5. CRE financing has the option of paying interest ONLY for 1-3 years. These loan products can help you lower your monthly payments so you can cash flow as you stabilize the property. These loans are popular with savvy investors.

6. Experience matters. Lenders will look at your and your partner's experience with similar assets when determining your eligibility for a loan

7.Fast-track your success by finding a partnership that can be mutually beneficial!

If you have any questions about these topics or would like to learn more about CRE financing I am happy to answer them here. or you feel free to DM me.

Good luck to all of you.

Mordy Chaimovitz

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John M.
Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 801 votes
3y
Most people who first start out invest in residential because it's more relatable and more affordable. Industrial is certainly an asset class that has dominated the headlines, but everything is relative to what your looking to accomplish. What kind of investor are you? Do you want to syndicate and scale a business or be a lone wolf? Do you seek value add or do you just want to park cash?....This question will determine the kind of returns you are looking for. Believe it or not you can start small in commercial for as little as $400K purchase depending on your strategy. Either way your in the right place so ask away.
6 Reply
Scott E.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
3y
I invested in residential for ~8 years before I did my first commercial deal. I started with a small medical condo unit in a great part of town. A year later I did a much larger office deal. And ever since I've been looking for more commercial opportunities.
The biggest challenge I've faced is that the commercial real estate community is a very small, tight knit group. There are a handful of "key players" and most of the top performing brokers already have deep relationships with those investors. Makes it hard for a new guy like me to break into commercial, because these other investors have spent decades developing relationships with commercial brokers and property owners.
Still pushing though and I'm sure that in this rising rate environment, more opportunities will start to surface.
7 Reply
Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
3y
Hey Chris, industrial is the path for me. I need to deploy larger check sizes, fewer headaches, longer leases, etc. I post a lot on my YT channel as well. Check out Chad Griffiths channel too!
5 Reply
Tanh Truong
Investor · Cincinnati, OH · Member since 2018 · 136 posts · 87 votes
3y
Chris, I agree. There's not a lot of resources out there in regards to commercial real estate. I am a part of a mastermind that deals with specifically non-residential commercial real estate. If you're interested in learning more about it, let me know. Disclaimer: I have no affiliation with running it.
3 Reply
Mordy Chaimovitz
Investor · Chicago · Member since 2022 · 128 posts · 85 votes
3y
I work with a lot of people that are transitioning from residential financing into CRE financing.
Here are some of the little-known facts that are important to be aware of, and catch a lot of investors by surprise.
1. Most lenders will require a borrower to have assets equal to the loan amount.
So if you were making a 10MM dollar purchase/REFI, with a 7.5MM dollar loan amount. you would need to have a net worth of 7.5MM Dollars!
2. You can partner with someone and combine each other's net worth to reach the loan amount, as long as your partner will have a 20% share in equity or more.
3. The borrowers will need to have 10% of the loan amount in liquid assets post-closing for reserves.
So in our example of a 10MM dollar purchase you need to come up with 2.5MM for the down payment plus closing costs, then still need 750k (10% of the loan amount) of liquid assets for reserves.
4. there are very few lenders that can lock you into a rate early on in the process. your rate will only lock after you have submitted all your documents to the lender, and they have approved your loan
5. CRE financing has the option of paying interest ONLY for 1-3 years. These loan products can help you lower your monthly payments so you can cash flow as you stabilize the property. These loans are popular with savvy investors.
6. Experience matters. Lenders will look at your and your partner's experience with similar assets when determining your eligibility for a loan
7.Fast-track your success by finding a partnership that can be mutually beneficial!
If you have any questions about these topics or would like to learn more about CRE financing I am happy to answer them here. or you feel free to DM me.
Good luck to all of you.
Mordy Chaimovitz
10 Reply
Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
3y
Chris major differences:
1. Loan to Value % higher. Finance terms- 5 usually, to 7 balloon period. Amort period 20 to 25 years. Construction loan interest only, Rent up phase interest only versus straight to P/I payment.
2. Generally larger dollars.
3. Zoning. And infrastructure. Normally pre-existing in SFH/MFH.
4. Insurance, triple net, Property tax, EPA concerns, etc.
5. Decide on your investment type. CRE can be almost anything. Dental offices, bowling alley, warehouse, restaurants, self storage, land development, etc.
6. As mentioned above people tend to invest in what they are comfortable with, housing.
7. Contractors. You're a small minnow in a big pond. Even if your big in your world, your small when it comes to contractors and tend to be more of a one-off deal versus if you own 20 houses or MFH units. Same as mentioned with Realtors above. If you need a house repainted or flooring replaced, you probably can find several people and schedules. If you need a Storm drain installed or Office walls torn down and replaced, fewer contractors and you have to fit their schedule since you're a small player.  You have to plan farther ahead.
8. Valuation based more on CAP rates and Lease terms if any, versus comparables.
You are in a great large market, thus tons of opportunities, just have to figure out your niche. If you're really interested recommend you do the normal podcasts, books, seminars.   But I would use this community and do some deal analyses. Go to Loopnet Los Angeles Commercial and Industrial. Look through the many types of properties and businesses and take a look at some niches. Bring the analyses back to this forum and ask for input. Do that about 3 times, then narrow down on a specific niche. Since this is a competitive market, you need to bring something different to the table, more of a Developers eye. Everyone can see a Medical office and think Medical office. But can you see a dumpy old industrial property and see a Medical office. That is where the money is, and also greater risk.
Appreciation versus return %. Either way you need to meet your CASH FLOW. From what I can tell California is an Appreciation play versus a return % investment. With that said, I like to make my money or appreciation up front and not wait on it. You also need to look at the investment but also everything around it.
Saw a horse stable in the middle of Los Angeles for sale. Definitely some value add there.
Palmdale is a little away, cheaper and zoning is more amicable. How can I marry Palmdale to Los Angeles? You don't have to be in Los Angeles to feed off the Los Angeles market.
Hope to see some deal analyses from you.
Our latest deal below. Most people see a bad farm. 75 acres with only 50 acres tillable and 3 little fields to move your big equipment into. I see two large dams and ponds. About 20 housing sites. The key to this deal is driveway entrances. If we can't get approved or make it work, we only get 12 lots. Which we make a little money, but not worth the risk. If we get 20 lots, this is a great deal.
Developer- potential high returns, but also high risk. I would tell people it is a very bad time to start a housing development. But I see a different market than most people will see. Who is right, don't care. We are putting our money down and taking on the risk. Point is you need to live and die with your decisions, don't blame other people. Do your research and then make a commitment.
7 Reply
Joe S.Pro Member
Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
3y
Quote from @Henry Clark:

Chris major differences:
1. Loan to Value % higher. Finance terms- 5 usually, to 7 balloon period. Amort period 20 to 25 years. Construction loan interest only, Rent up phase interest only versus straight to P/I payment.
2. Generally larger dollars.
3. Zoning. And infrastructure. Normally pre-existing in SFH/MFH.
4. Insurance, triple net, Property tax, EPA concerns, etc.
5. Decide on your investment type. CRE can be almost anything. Dental offices, bowling alley, warehouse, restaurants, self storage, land development, etc.
6. As mentioned above people tend to invest in what they are comfortable with, housing.
7. Contractors. You're a small minnow in a big pond. Even if your big in your world, your small when it comes to contractors and tend to be more of a one-off deal versus if you own 20 houses or MFH units. Same as mentioned with Realtors above. If you need a house repainted or flooring replaced, you probably can find several people and schedules. If you need a Storm drain installed or Office walls torn down and replaced, fewer contractors and you have to fit their schedule since you're a small player.  You have to plan farther ahead.
8. Valuation based more on CAP rates and Lease terms if any, versus comparables.
You are in a great large market, thus tons of opportunities, just have to figure out your niche. If you're really interested recommend you do the normal podcasts, books, seminars.   But I would use this community and do some deal analyses. Go to Loopnet Los Angeles Commercial and Industrial. Look through the many types of properties and businesses and take a look at some niches. Bring the analyses back to this forum and ask for input. Do that about 3 times, then narrow down on a specific niche. Since this is a competitive market, you need to bring something different to the table, more of a Developers eye. Everyone can see a Medical office and think Medical office. But can you see a dumpy old industrial property and see a Medical office. That is where the money is, and also greater risk.
Appreciation versus return %. Either way you need to meet your CASH FLOW. From what I can tell California is an Appreciation play versus a return % investment. With that said, I like to make my money or appreciation up front and not wait on it. You also need to look at the investment but also everything around it.
Saw a horse stable in the middle of Los Angeles for sale. Definitely some value add there.
Palmdale is a little away, cheaper and zoning is more amicable. How can I marry Palmdale to Los Angeles? You don't have to be in Los Angeles to feed off the Los Angeles market.
Hope to see some deal analyses from you.
Our latest deal below. Most people see a bad farm. 75 acres with only 50 acres tillable and 3 little fields to move your big equipment into. I see two large dams and ponds. About 20 housing sites. The key to this deal is driveway entrances. If we can't get approved or make it work, we only get 12 lots. Which we make a little money, but not worth the risk. If we get 20 lots, this is a great deal.
Developer- potential high returns, but also high risk. I would tell people it is a very bad time to start a housing development. But I see a different market than most people will see. Who is right, don't care. We are putting our money down and taking on the risk. Point is you need to live and die with your decisions, don't blame other people. Do your research and then make a commitment.

I enjoyed reading your post. I could only vote once so I figured I needed to tell you.
0 Reply
Joe S.Pro Member
Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
3y
Quote from @Mordy Chaimovitz:

I work with a lot of people that are transitioning from residential financing into CRE financing.
Here are some of the little-known facts that are important to be aware of, and catch a lot of investors by surprise.
1. Most lenders will require a borrower to have assets equal to the loan amount.
So if you were making a 10MM dollar purchase/REFI, with a 7.5MM dollar loan amount. you would need to have a net worth of 7.5MM Dollars!
2. You can partner with someone and combine each other's net worth to reach the loan amount, as long as your partner will have a 20% share in equity or more.
3. The borrowers will need to have 10% of the loan amount in liquid assets post-closing for reserves.
So in our example of a 10MM dollar purchase you need to come up with 2.5MM for the down payment plus closing costs, then still need 750k (10% of the loan amount) of liquid assets for reserves.
4. there are very few lenders that can lock you into a rate early on in the process. your rate will only lock after you have submitted all your documents to the lender, and they have approved your loan
5. CRE financing has the option of paying interest ONLY for 1-3 years. These loan products can help you lower your monthly payments so you can cash flow as you stabilize the property. These loans are popular with savvy investors.
6. Experience matters. Lenders will look at your and your partner's experience with similar assets when determining your eligibility for a loan
7.Fast-track your success by finding a partnership that can be mutually beneficial!
If you have any questions about these topics or would like to learn more about CRE financing I am happy to answer them here. or you feel free to DM me.
Good luck to all of you.
Mordy Chaimovitz

The items listed above is definitely what puts people back on the porch rethinking their plan.
Thanks for breaking it down.
1 Reply
Paul MoorePro Member
Commercial Real Estate Fund Manager · Lynchburg, VA · Member since 2015 · 1k+ posts · 1k+ votes
3y
Hi @Chris Lai! I spent well over a decade in residential real estate. I did all types of things including flipping houses, flipping waterfront lots, building homes from the ground up and a subdivision. I always wondered about commercial real estate but I did not know who to trust or how to get started.

When I looked into it further I realized there were massive barriers to entry that stop most people from investing. Net worth, liquidity, experience, deal size, and more.

Thankfully the Jobs Act of 2012 and some other things have allowed many people to participate in commercial real estate through commercial syndications and funds. Now a lot of accredited and non-accredited investors have access to invest in self storage, apartments, RV parks, mobile home parks, light industrial and more. @Chris Lai if you'd like I can share a brief, free 5-day course I put together on how to invest in commercial real estate, please feel free to DM me. Good luck and happy investing!
Podcast Guest on Show #533
1 Reply
Joe S.Pro Member
Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
3y
Quote from @Paul Moore:

Hi @Chris Lai! I spent well over a decade in residential real estate. I did all types of things including flipping houses, flipping waterfront lots, building homes from the ground up and a subdivision. I always wondered about commercial real estate but I did not know who to trust or how to get started.

When I looked into it further I realized there were massive barriers to entry that stop most people from investing. Net worth, liquidity, experience, deal size, and more.

Thankfully the Jobs Act of 2012 and some other things have allowed many people to participate in commercial real estate through commercial syndications and funds. Now a lot of accredited and non-accredited investors have access to invest in self storage, apartments, RV parks, mobile home parks, light industrial and more. @Chris Lai if you'd like I can share a brief, free 5-day course I put together on how to invest in commercial real estate, please feel free to DM me. Good luck and happy investing!

Do you have a course on how to own commercial real estate and not just how to invest in someone else’s fund?
0 Reply
Al M.
Lender · Los Angeles, CA · Member since 2017 · 39 posts · 15 votes
3y
@Henry Clark and @Mordy Chaimovitz are spot on. These are key differences, but like everything else, once one gains experience in that space, these will just be part of doing business.
1 Reply
Scott KronePro Member
Investor · Northbrook, IL · Member since 2017 · 352 posts · 295 votes
3y
@Chris Lai I would offer that expectations are vastly different between residential and commercial. It is assumed (rightly or wrongly) most people will buy a home. The progression through life - graduate from school, get a job, rent an apartment, start a family, need more space, buy a house. So, there is an underlying assumption, anyone can buy a home - be it to live in, rent, fix and flip, etc. There are plenty of people to assist with that process - real estae agents, banks, repair people, etc.
However, when it comes to commercial there is a different expectation. You know what you are doing, and you have your "act together". There are other more profane was of saying the same thing. So, yes there are all the things that others have noted above which all point to the same thing: knowledge and more importantly wisdom. There are many in the forum which feel and promote that can be gained from reading posts, etc. Others feel mentors and coaching are key means to accomplish this. There is also the position that networking with local communities is a vital aspect in growth.
It may be one, two, three or all the above. For me, it was school, reading books (Paul Moore's book "Storing Profits" is great for self storage and applies beyond storage), mentor, and working for and in the industry all were vital in my development. There is a significant difference between information, knowledge and wisdom.
We all have access to information - google, internet, etc. Knowledge is applying information, and wisdom is having experience based upon knowledge. I would encourage all to seek as many avenues as possible to not only gain information, but also knowledge and lean into others wisdom.
1 Reply
Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
3y
Quote from @Joe S.:

Quote from @Paul Moore:

Hi @Chris Lai! I spent well over a decade in residential real estate. I did all types of things including flipping houses, flipping waterfront lots, building homes from the ground up and a subdivision. I always wondered about commercial real estate but I did not know who to trust or how to get started.

When I looked into it further I realized there were massive barriers to entry that stop most people from investing. Net worth, liquidity, experience, deal size, and more.

Thankfully the Jobs Act of 2012 and some other things have allowed many people to participate in commercial real estate through commercial syndications and funds. Now a lot of accredited and non-accredited investors have access to invest in self storage, apartments, RV parks, mobile home parks, light industrial and more. @Chris Lai if you'd like I can share a brief, free 5-day course I put together on how to invest in commercial real estate, please feel free to DM me. Good luck and happy investing!

Do you have a course on how to own commercial real estate and not just how to invest in someone else’s fund?

One of the big challenges is that few people who are good at it, will take the time or effort to create a direct CRE course. Much more joy and money to be made directly doing deals. In residential, plenty of gurus to sell a course and make more money from teaching rather than doing.
2 Reply
Michael Margarella
Investor · New York City · Member since 2020 · 164 posts · 75 votes
3y
We pivoted to self-storage a few years ago. Even if there is a crash, and people downsize, those people will have a need for self-storage, as evidenced by storage occupancy rates during past recessions.

And during inflationary times, our rental rates increase. We're also able to evaluate our rates, and keep pace with inflation, on a monthly and quarterly basis because of shorter term leases.

The Storage Rebellion offers a free “boot camp” about owning self-storage and is a good place to start.

0 Reply
Paul De Luca
Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
3y
Quote from @Joe S.:

Quote from @Paul Moore:

Hi @Chris Lai! I spent well over a decade in residential real estate. I did all types of things including flipping houses, flipping waterfront lots, building homes from the ground up and a subdivision. I always wondered about commercial real estate but I did not know who to trust or how to get started.

When I looked into it further I realized there were massive barriers to entry that stop most people from investing. Net worth, liquidity, experience, deal size, and more.

Thankfully the Jobs Act of 2012 and some other things have allowed many people to participate in commercial real estate through commercial syndications and funds. Now a lot of accredited and non-accredited investors have access to invest in self storage, apartments, RV parks, mobile home parks, light industrial and more. @Chris Lai if you'd like I can share a brief, free 5-day course I put together on how to invest in commercial real estate, please feel free to DM me. Good luck and happy investing!

Do you have a course on how to own commercial real estate and not just how to invest in someone else’s fund?

Crushing It In Apartments and Commercial Real Estate is a good book to read.
1 Reply
Andrew Valdez
Real Estate Agent · Norfolk, VA · Member since 2016 · 12 posts · 1 vote
3y
Quote from @Henry Clark:

Chris major differences:
1. Loan to Value % higher. Finance terms- 5 usually, to 7 balloon period. Amort period 20 to 25 years. Construction loan interest only, Rent up phase interest only versus straight to P/I payment.
2. Generally larger dollars.
3. Zoning. And infrastructure. Normally pre-existing in SFH/MFH.
4. Insurance, triple net, Property tax, EPA concerns, etc.
5. Decide on your investment type. CRE can be almost anything. Dental offices, bowling alley, warehouse, restaurants, self storage, land development, etc.
6. As mentioned above people tend to invest in what they are comfortable with, housing.
7. Contractors. You're a small minnow in a big pond. Even if your big in your world, your small when it comes to contractors and tend to be more of a one-off deal versus if you own 20 houses or MFH units. Same as mentioned with Realtors above. If you need a house repainted or flooring replaced, you probably can find several people and schedules. If you need a Storm drain installed or Office walls torn down and replaced, fewer contractors and you have to fit their schedule since you're a small player.  You have to plan farther ahead.
8. Valuation based more on CAP rates and Lease terms if any, versus comparables.
You are in a great large market, thus tons of opportunities, just have to figure out your niche. If you're really interested recommend you do the normal podcasts, books, seminars.   But I would use this community and do some deal analyses. Go to Loopnet Los Angeles Commercial and Industrial. Look through the many types of properties and businesses and take a look at some niches. Bring the analyses back to this forum and ask for input. Do that about 3 times, then narrow down on a specific niche. Since this is a competitive market, you need to bring something different to the table, more of a Developers eye. Everyone can see a Medical office and think Medical office. But can you see a dumpy old industrial property and see a Medical office. That is where the money is, and also greater risk.
Appreciation versus return %. Either way you need to meet your CASH FLOW. From what I can tell California is an Appreciation play versus a return % investment. With that said, I like to make my money or appreciation up front and not wait on it. You also need to look at the investment but also everything around it.
Saw a horse stable in the middle of Los Angeles for sale. Definitely some value add there.
Palmdale is a little away, cheaper and zoning is more amicable. How can I marry Palmdale to Los Angeles? You don't have to be in Los Angeles to feed off the Los Angeles market.
Hope to see some deal analyses from you.
Our latest deal below. Most people see a bad farm. 75 acres with only 50 acres tillable and 3 little fields to move your big equipment into. I see two large dams and ponds. About 20 housing sites. The key to this deal is driveway entrances. If we can't get approved or make it work, we only get 12 lots. Which we make a little money, but not worth the risk. If we get 20 lots, this is a great deal.
Developer- potential high returns, but also high risk. I would tell people it is a very bad time to start a housing development. But I see a different market than most people will see. Who is right, don't care. We are putting our money down and taking on the risk. Point is you need to live and die with your decisions, don't blame other people. Do your research and then make a commitment.

Great read. Thank you! Do you have any suggestions on books talking about framework around different niches and possibly in-depth talk around the finances and how someone looks at this from a Macro perspective and how a developer determines what's needed in an area the gimme answer is Residential but other niches for example industrial, storage
0 Reply
Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
3y
@Andrew Valdez Unfortunately, I haven't read a book on Real Estate. Did the worst thing possible and learn by mistakes. Without going into my professional background, I followed the below.
Start small and Make Your Big Mistakes Early.

I always say use your strengths or look for nasty properties.
You're in Norfolk, VA. Please spend a weekend, building a Business model around BAH (Base Allowance Housing). Several models or lines of business. This applies to both Military and Civil services in some instances. Make several models then reach out to me. I don't want to lead your thinking. Your Business should Blow up, no matter what the economy.
0 Reply
Paul MoorePro Member
Commercial Real Estate Fund Manager · Lynchburg, VA · Member since 2015 · 1k+ posts · 1k+ votes
3y
@Joe S. I have a free e-course on investing in commercial real estate which overviews the basics. You can get this by sending me a DM with your email.
You might also want to check the Alternative Investor Almanac by Denis Shapiro. Last year I published a book on self-storage investing. The last 1/3 of the book was dedicated to 7him different paths to invest in commercial real estate. Though I was specifically talking about self storage, the principles work for other assets in commercial real estate and I recommend you check that out. Happy investing!
Podcast Guest on Show #533
1 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Chris Lai:

Commercial Real Estate Investment > Residential

Many co-workers/friends (upper-middle class) invest in residential real estate to rent out and do airbnbs or furnished finders. But, no one I know is in commercial real estate. When I talked to my friends about it, most people just don't know how to invest in commercial and the upfront capital is deterring. I did some research online- looks like there's very limited information on CRE online as well.

I’ve found info regarding Triple Net lease and the industrial asset class seems amazing. The returns are insane in both appreciation and passive income compared to the current residential where I’m seeing 2-4% cap in CA or TX. Any other good materials y’all got for breaking into commercial real estate investing?

Here are videos I’ve watched so far on commercial real estate

How real is this deal? I’m guessing it’s very rare since there’s a video on it. For people getting in commercial what are some returns people expect?

Any other resources y’all recommend for commercial real estate?

Simply because to invest in CRE, it's way easier to invest via indirect investment. For CRE your network to be equal to the asset class.
0 Reply
Andrew Valdez
Real Estate Agent · Norfolk, VA · Member since 2016 · 12 posts · 1 vote
3y
Quote from @Henry Clark:

@Andrew Valdez Unfortunately, I haven't read a book on Real Estate. Did the worst thing possible and learn by mistakes. Without going into my professional background, I followed the below.
Start small and Make Your Big Mistakes Early.

I always say use your strengths or look for nasty properties.
You're in Norfolk, VA. Please spend a weekend, building a Business model around BAH (Base Allowance Housing). Several models or lines of business. This applies to both Military and Civil services in some instances. Make several models then reach out to me. I don't want to lead your thinking. Your Business should Blow up, no matter what the economy.

I will look into this. While I dont like making mistakes its the only way to learn. I have been using this approach myself but its slow and grinding and leaves a lot of risk on the table. I found this book called "Real Estate Development Workbook and Manual" By Howard A Zuckerman & George D Blevins its a like 700+ pg book and the book was printed in the 90's and fundamental literature seems to be on par with lots of things but un experienced person like myself I dont know whats old school and new school.
Thanks for the reply!
0 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
3y
My clients with 8 to 9 figure wealth and 7 figure an up annual cash flow could CARE LESS about air bnb and residential. You are in different income circles likely of people making 200k to 300k a year trying to work for higher yield versus passive yield with NNN.
There is wealth accumulation phase, stabilization, and preservation phase depending on wealth level and age in life (typically).
I have talked with thousands of millionaires over the decades. Some newly minted and others with vast sums of wealth. Usually once they hit a certain wealth point they let off the gas and want to outpace inflation by a factor of 2 to 3 times and coast with keeping the money safe.
When you get older in life what you do not have much of is more TIME. Money can be infinite almost so going from 40 to 50 million isn't usually as exciting as the first million getting close to being financially free. I wrote a book on NNN. It's free just have to go to my site and fill out a form.
Podcast Guest on Show #47
NNN Invest53 Reviews
Website View Page
5 Reply
Joseph Gozlan
Real Estate Agent · Plano, TX · Member since 2015 · 734 posts · 511 votes
3y
Let me sum it up in one sentence:
Commercial real estate = more zeros, less headache!
3 Reply
Chris W.
Member since 2018 · 23 posts · 7 votes
3y
Quote from @Andrew Valdez:

Quote from @Henry Clark:

@Andrew Valdez Unfortunately, I haven't read a book on Real Estate. Did the worst thing possible and learn by mistakes. Without going into my professional background, I followed the below.
Start small and Make Your Big Mistakes Early.

I always say use your strengths or look for nasty properties.
You're in Norfolk, VA. Please spend a weekend, building a Business model around BAH (Base Allowance Housing). Several models or lines of business. This applies to both Military and Civil services in some instances. Make several models then reach out to me. I don't want to lead your thinking. Your Business should Blow up, no matter what the economy.

I will look into this. While I dont like making mistakes its the only way to learn. I have been using this approach myself but its slow and grinding and leaves a lot of risk on the table. I found this book called "Real Estate Development Workbook and Manual" By Howard A Zuckerman & George D Blevins its a like 700+ pg book and the book was printed in the 90's and fundamental literature seems to be on par with lots of things but un experienced person like myself I dont know whats old school and new school.
Thanks for the reply!

I 1031 exchanged from a small Hawaii condo into a 6k sq. ft. office building in Olde Towne Portsmouth, Va. Dave Foster from 1031 ERG on here was instrumental, as was my lawyer Jeff Tinkham in downtown Norfolk. I have 0 previous commercial experience and did a ton of reading prior to purchasing the building. Once I had it under contract, I used nearly my entire 180 day period of my 1031 to conduct EXTENSIVE due diligence. Was complimented on how well executed it was by the sellers agent. Purchased the property for around $400k on a 15 year commercial note at 4% interest in October of last year. Most of what I learned prior to purchase, was learned here. I also suggest familiarizing yourself with the VODI. It can give you some insight in office space demand (if that's what you're going for). I use pro management and leasing on my property also.....pretty sure some sleuth on here will context clue their way to my listing lol.
Someone on here told me I should wait since I had no experience....screw that. It's paying off unusually well now. Sometimes you have to be willing to shoulder the risk and learn the hard way. Certain opportunities do not always come your way.
Henry Clark's BAH advice is EXCELLENT!!!!!!!! I'm retired military, and may soon also be Federal. I used my BAH relatively wisely and it ultimately landed my building.
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Cody J Leivas
Real Estate Consultant · Rancho Mission Viejo, CA · Member since 2018 · 41 posts · 36 votes
3y
More risk = Higher potential return
Below are the typical risk-for-return classifications for a standard commercial investment:
Opportunistic - Lease up vacant space / heavy renovation / change property use - +20% Internal Rate of Return (IRR)
Value Add - Some lease-up risk, short-term leasing risk, some renovation, Increase rents - +15% IRR.
Core Plus - 5-year + lease term with under-market rents, increase rents to market, minimal to no reno - 12 - 15% IRR.
Core - New building with strong tenant on a long-term lease - 8 - 12% IRR.
Timelines for these will vary as well. I've underwritten close to 200 deals this year. I personally look to invest in core plus or value add deals with low lease rates relative to the market, low basis compared to replacement costs and comps, and limited supply in major MSAs.
1 Reply
Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
3y
@Chris Lai
You ghosted your post.
What's the next step? Do you want to invest in CRE?
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