Moving from Multi-family to Commercial Office building?

Question

I am looking at an office building that is for sale close to my multifamily building, within 4 min, and wanted to know if some of you have added or moved to commercial office building?

Was it completely different or close to how you run the multifamily?

Thanks!

Dave

Joel Owens · Answer

Office has some value right now along with industrial. Retail MTNL still has about 2 years left on the run up.

I like retail over office for various reasons. I would only do office if I had great break even occupancy.

I do not like one or two tenants and if something happens they are gone and now I might have to throw money at the mortgage each month. Office can also leave pretty quick in the middle of the night. Retail it is much harder to move to another location depending on the tenant.

I bought an office condo building earlier this year to have an employee. I could have bought more in there but didn't want to hold much of that in the portfolio. If you go medical office and there is a lot of TI spent for a medical practice they do not leave as much because of the build out expense. For office I would be wanting a 9 to 10 cap or higher at this point in the cycle. 7 to 8's for that product is overpriced at this time in my view unless rents are at about half of current market. Sometimes in recent years a property was bought as an REO and filled up fast at very low rents. Then in the leases they have 3% annual rent bumps which over time makes the blended cap rate much higher and even with the increases you are way below market so the tenants tend to keep staying. I like those kinds of deals versus showing a high cap with an over inflated leases on the books that might trade down.

Ash Patel · Answer

I have mixed use, retail, medical, residential and office properties. I can tell you that the office building is the most work by a factor of 10. Single tenant retail is a breeze compared to office buildings.

Joe Fairless · Answer

@dave

@Dave ChapaI haven't ventured away from large multifamily but I have interviewed Craig Coppola and read his books on Office investing. Highly recommend checking out his book How to Win in Commercial Real Estate Investing. The title implies it's more general but the book is actually focused on buying office buildings.

Dave Chapa · Answer

I'm always looking for opportunities and exploring other options. So,thanks for the great comments! I think I will stick with multifamily for now.

John Cohen · Answer

@Dave Chapa I also have been starting to look at office, generally it trails multifamily so I think is a great opportunity right now.

Mark Creason · Answer

I think office is easier to manage. You do not have people calling you up at 3 in the morning to fix the plumbing.

Mark

Moving from Multi-family to Commercial Office building?

Moving from Multi-family to Commercial Office building?

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