How can I get back into Commercial investments?

Question

I've been investing and managing properties for two years here in Dallas.  Most of my experience is in residential.  I do own an 8 unit apartment, which was a huge learning experience for me.  I knew nothing when I purchased it and was taken to the bank.  I'll spare the details, but suffice it to say, it was not a money maker.  I'm determined to get back in the game now that I'm approaching a full recovery, but I'd like advise from senior commercial investors.  Any recommendations?
Glenn

NA NA · Answer

Glenn,

Having invested in residential real estate for more than 20 years, it sounds like you kinda just got a bigger sized residential property. I suggest that you look a moving up now that you have experienced the tough times and think about a larger complex where you can afford to hire a managment team to do the grunt work.

If you'd like, I can try to help you out some personally in my spare time.  I usually get some great ideas late at night when I'm up working. So if you need a little help I can try to get you some answers. Just send me some more details, like your balance and terms on the property, rents, details, etc. for me to think over. One of my partners has a client in the Dallas area and knows a Realtor there also.

Mike

N/A N/A · Answer

I hope someone is taking an interest in reading this.  I'm sincere in my desire to move forward with commercial investing.  Certainly there's someone out there that can offer insight and wisdom of how to get off on the right foot?

Mark Shah · Answer

Glenn,

Try looking into TIC's or NNN deals. They might be what you are looking for.

N/A N/A · Answer

Glenn,

I've been caught in some similar situations on residential properties while trying to help out some other people. I feel for you.

But keep your head up. There are still plenty of opportunities out there to turn your investing around and make a big change.

Kelvin

N/A N/A · Answer

Have you thought about triple-net properties? If the problems with the apartment building were related to management headaches and maintenance expenses, this might be something to consider. You get a potentially smaller return, but also a much safer and more predictable (as well as hassle-free) investment.

N/A N/A · Answer

So, here's my story.  I purchased an 8-unit at 75% LTV using my older brother's capital.  I strolled through the due diligence process without verifying financials or looking closely at the property condition, which had major issues that later came around to be huge headaches.  The property was class D all the way.  I didn't have a plan for filling vacancy, nor maintenance, nor management.  I simply thought I'd make some improvements to the units, raise rents, and collect income each month.  Renovating a unit was more than expected and wasn't received by the market as anticipated.  I experienced months of 50% vacancy until I finally made drastic changes by splitting the floor plan and renting as two single room occupancies instead of a 1bd/1bth.  Now there's no more negative cashflow, but some major repair items still exist, which I can't put more capital into having repaired.

I've learned a great deal, but haven't been able to recoup the capital investment that was sunk into this project.  It's been my experience that commercial projects require larger down payments, 10%, 20% or even 25%.  There can be more moving parts to a commercial project and more compliance concerns.  As far as office space, warehouse, or retail, I don't know how to go about evaluating those opportunities.  I have an understanding of analyzing the income statement determining a cap rate, but when it comes to individual expenses: contracted services & maintenance, utilities, insurance, reasonable vacancy, advertising, management etc.  I haven't a clue.  In addition, the income: what lease terms are reasonable, lease type (triple net or gross), tenant screening.  Also if you purchase a property with high vacancy, one in which the income doesn't support the holding expense, is it worth considering a buy and hold until the vacancy is resolved to get back to black?

It seems the landscape is overwhelming.  There seems to be so much information to injest.

N/A N/A · Answer

If you have financing questions, let me know. As a Commercial Mortgage Broker, I have dozens of Lenders to work with, and a long list of Hard Money sources too.

N/A N/A · Answer

The way to get back into  commercial investing is to first identify what market you want to be in...apartments, office bldgs, retail etc...
What are you considering?

Tammy Guerrino · Answer

Good luck getting started again, I work in a National Commercial and Residential Title insurance as well as 1031 exchange, Lease Probe and Cost Segregation.

If I can be of any assistance please let me know.

Sincerely,
Tammy

Mark R · Answer

Might help to enlighten the exprienced ones on what problems you ran across so they can advise on what to do differently. Also so that they don't give advice that didn't work out for you in the past.