Advertising question for commercial properties & investing

14 Replies

Howdy BiggerPockets!

I have recently stated working with a commercial real estate broker in The Woodlands, Texas and have been tasked with attempting to sell either partially or in its entirety 70+acres of a continuous lot and/or raise infrastructure funds for partial development. Being new to commercial real estate, I want to ask for general advice on BP regarding methods used for finding an audience big enough for this larger, less-liquid property? The land itself is in an incredible location, directly along a developing highway that has been anticipated for years. This makes me think that the land itself will spark a lot of interest for the right people, I am simply asking for advice on best practices for getting in touch with these individuals and the differences (if any) from methods used in residential properties.

Thanks for your help in advance!

Jordan

Jordan,

The best thing is to call up local, regional and national developers and expose the property to them. You can find them by searching development companies online in your area, you can also locate the new developments in your area and then find out who the developer is, they will usually have a website. Then you call them up and introduce yourself and let them know you have a property that may interest them. Make sure to have a complete and thorough package to send after you call them. The more info and detail about the property the better. 

@Jordan Prentice I think @Greg Dickerson gives some great points here. I would find the big developers and make them my focus. Also - I would brainstorm some ideas yourself and come up with a concept that might work. It might take some $ to bring to life but at least you have an idea to then communicate. From a capital raising standpoint, I can help on that front - but you need to have a solid plan in place first. 

Thank you guys very much for the quick and helpful responses!

@Greg Dickerson  Hi Greg! That is great advice and something I will implement immediately! I would need to talk to my broker to determine what information to include that the developers typically want to know.

@Logan Freeman  Hi Logan! I know that we are looking to raise $2 million as of now for infrastructure costs and would be happy to give you as much information as you would like. I know that there is a specific plan that is currently in place for the property so I would love to work with you regarding terms and information you might need.

@David 

@David Miller Hi David! While the property's physical address is in Magnolia, it is extremely close to The Woodlands.

Google shows Magnolia about 30 miles away from the Woodlands. Google mentions Magnolia median income of only 44,000 which is below the national average. Says 21% lower than Texas and 22% lower than national average.

Median income in the Woodlands is about 110,000. You are talking about different Universes for development. I know most of the developers in Texas in my database on the commercial retail side. We are long in the cycle right now. 70 plus acres is a master development that to finish out could take multiple developer specialties and phases over a 7 to 10 year cycle or longer. That is a massive project that developers typically like to start bottom of a cycle to mid cycle at most. Typically developers are after quick 1 to 2 acre projects they can turn in 1 to 2 years max with not much capital outlay. That size of a project 70 plus acres you could spend 7 figures in due diligence and costs alone.

Sounds like a huge project in just an okay market to me but I am not a Texas expert. I do know most of the high end areas as my clients want to own retail there. Usually high end areas are at 100k incomes or higher with strong density levels for population.

If you have nothing but time and want to learn then calling and calling might not get you any money earned but knowledge. 12 years ago I worked on a project assembling 25 acres for a commercial developer with lot's of different property owners. I was successful but timing was not right as top of the cycle. Publix was going in but said mix of 800k homes and 50k homes they would not have close to 100% their ideal customer living there. Local developers in my area stopped building high end residential as down turn was happening. Ground up developers when cycle starts downward want existing projects for turn around to create cash and value faster.

I do know some developers doing big projects (250 million value) in other states but they have very deep pockets and have been doing it over 40 years. They can hold a project and pull it through regardless of cycle and calculate it into their returns. Right now steel costs and materials, land costs, labor costs, and legal costs are all up. That means rents have to be strong to pencil a large project like that.

I could keep going on and on about slope of the land and cost to get vertical ready etc. This stuff has tons of moving parts. What made you want to work on this?? 

@Joel Owens  

Thank you so much for taking the time to sit down and share so much information. You are absolutely right when stating that Magnolia and The Woodlands are two completely worlds, the thing that brings them together is that the property is overlapping in a way (East end of Magnolia, West end of Woodlands) and is right along the currently developing "Aggieland/Baylor Parkway" which is a highway system that has been anticipated for years as it will drastically cut down travel time from the greater Houston area to both Texas A&M and Baylor University. There are currently developers working in surrounding lots to put up neighborhoods, multi-family properties, and new grocery stores. So while the market itself in Magnolia is not the most ideal market in regards to demand and median income, the highway system and the proximity of this property to it is what will offset that to some degree.

The main reason for wanting to work on this has 2 parts:

1. I wanted to work with someone willing to mentor me in commercial/multi-family properties and I was put in contact with a broker through family connections. This 70+ acre project is one of the projects he currently has going on and has asked me to help him with.

2. I am new to real estate and do not know too much outside of what I learn off of BP podcasts, BP books and other real estate books. I wanted something challenging with a ton of moving parts to potentially start off my investing career with simply from a learning perspective and this project fit the bill. I learn best when I get thrown into the fire and am responsible for making things happen with little to no background so I know I will get a lot out of working on this.

Main point - I simply think a lot could be learned from this project and with few alternatives to have a hands-on learning experience, this project is my best bet for now.

I am 23 and have recently graduated (4 weeks ago) from Texas A&M with a Petroleum Engineering degree and am currently job searching for a full time position. While I have been applying for jobs and going on interviews, I have dove into real estate investing and am trying to put what I have learned into action. In regards to this, I did not want to start off with a single family residential property simply because I wanted to affirm a mindset of creating something big and making that a standard. I have recently worked out some financing and put in a bid for an 8-unit multi-family property but after rerunning some more numbers I think I will be retracting my offer and continuing to search for a new property.

Originally posted by @Jordan Prentice :

@Joel Owens  

Thank you so much for taking the time to sit down and share so much information. You are absolutely right when stating that Magnolia and The Woodlands are two completely worlds, the thing that brings them together is that the property is overlapping in a way (East end of Magnolia, West end of Woodlands) and is right along the currently developing "Aggieland/Baylor Parkway" which is a highway system that has been anticipated for years as it will drastically cut down travel time from the greater Houston area to both Texas A&M and Baylor University. There are currently developers working in surrounding lots to put up neighborhoods, multi-family properties, and new grocery stores. So while the market itself in Magnolia is not the most ideal market in regards to demand and median income, the highway system and the proximity of this property to it is what will offset that to some degree.

The main reason for wanting to work on this has 2 parts:

1. I wanted to work with someone willing to mentor me in commercial/multi-family properties and I was put in contact with a broker through family connections. This 70+ acre project is one of the projects he currently has going on and has asked me to help him with.

2. I am new to real estate and do not know too much outside of what I learn off of BP podcasts, BP books and other real estate books. I wanted something challenging with a ton of moving parts to potentially start off my investing career with simply from a learning perspective and this project fit the bill. I learn best when I get thrown into the fire and am responsible for making things happen with little to no background so I know I will get a lot out of working on this.

Main point - I simply think a lot could be learned from this project and with few alternatives to have a hands-on learning experience, this project is my best bet for now.

I am 23 and have recently graduated (4 weeks ago) from Texas A&M with a Petroleum Engineering degree and am currently job searching for a full time position. While I have been applying for jobs and going on interviews, I have dove into real estate investing and am trying to put what I have learned into action. In regards to this, I did not want to start off with a single family residential property simply because I wanted to affirm a mindset of creating something big and making that a standard. I have recently worked out some financing and put in a bid for an 8-unit multi-family property but after rerunning some more numbers I think I will be retracting my offer and continuing to search for a new property.

 Dog of a project for someone with a much more valuable specific degree.

Do you have a pitch book yet? You need a vision of what the highest and best use is, likely going to be phased development and I doubt even the back half will develop in next 5-10 years. You're going to be carving out parcels for a gas station, fastfood, maybe a hotel. 3-5 acres at a time. Whats the utility situation? Estimate on costs?

@Ronald Rohde

I absolutely look forward to my career in Petroleum Engineering but I wanted to at least get some sort of work in regarding real estate while I had an ample amount of time. 

We are working on a pitch book currently but you're right in the sense that we are looking for selling a small parcel of the lot first. If we get any small piece of the property sold we have an investor willing to pull the trigger on the remainder of the land. Part of the property has been deemed a promising location for residential/multi-family with the remainder being office space & shopping complexes. We are currently looking to raise $2 million in cash to run utilities and begin infrastructure of the property.

You really need a developer that wants a LEGACY asset to pour their heart and soul into over decades. We have some of those here where I live in GA. They tend to be older in age 70's and up and have more money than they know what to do with. They just want a challenging project to put together like a jigsaw puzzle and bragging rights with their buds on what they created and how they made it happen. Sure money and return comes into it but not the top factor.

If parceling out it all comes down to cost. You have to know what you are selling each piece of the project for. To do that you take the typical new development cap rate of what you think it will be for that highest and best use asset type when the property is rented and stabilized. Then you work the numbers backwards in cost to a breakeven point and then figure in your profit for selling the land. If the price you need to sell the land for with leveling and compaction with utilities to the site or curb is too high for what a developer would pay for profit built in then you have a huge problem with the project. Who is going to pay for streets, lighting, red lights, widening of main roads into the project, impact fees from county or city, etc. Counties and cities love developers to pay for everything to solve their budget problems but developers cannot do this or projects would fail. There are also sometimes TIF funding and other finance structures to make a development deal work.

Good Luck

I just like existing buildings now. When I assemble raw land for commercial commission it could be years before I get paid and then economic cycle could fall. With existing there is income coming in and a buyer purchases it and I get paid in 2 to 4 months time with a big check. In the beginning I was hungry to learn everything. Once you learn a good amount of different things then you focus on what you feel gives a good return on time and is fulfilling to you for the least amount of headache possible. 

Originally posted by @Joel Owens :

You really need a developer that wants a LEGACY asset to pour their heart and soul into over decades. We have some of those here where I live in GA. They tend to be older in age 70's and up and have more money than they know what to do with. They just want a challenging project to put together like a jigsaw puzzle and bragging rights with their buds on what they created and how they made it happen. Sure money and return comes into it but not the top factor.

If parceling out it all comes down to cost. You have to know what you are selling each piece of the project for. To do that you take the typical new development cap rate of what you think it will be for that highest and best use asset type when the property is rented and stabilized. Then you work the numbers backwards in cost to a breakeven point and then figure in your profit for selling the land. If the price you need to sell the land for with leveling and compaction with utilities to the site or curb is too high for what a developer would pay for profit built in then you have a huge problem with the project. Who is going to pay for streets, lighting, red lights, widening of main roads into the project, impact fees from county or city, etc. Counties and cities love developers to pay for everything to solve their budget problems but developers cannot do this or projects would fail. There are also sometimes TIF funding  and other finance structures to make a development deal work.

Good Luck

I just like existing buildings now. When I assemble raw land for commercial commission it could be years before I get paid and then economic cycle could fall. With existing there is income coming in and a buyer purchases it and I get paid in 2 to 4 months time with a big check. In the beginning I was hungry to learn everything. Once you learn a good amount of different things then you focus on what you feel gives a good return on time and is fulfilling to you for the least amount of headache possible. 

 What Joel said!

Is it in an Opportunity Zone?