Commercial RE in Southern California
Irvine, CA · Member since 2015 · 29 posts · 4 votes
Commercial RE in Southern California
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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votesRecommend you put more thought and description into the type of CRE. This will help both you and the realtor to focus.
Retail store fronts, offices, Medical complexes, Storage, Truckstops, Parking lots, bowling alley, Governmental, contractor buildings, etc. Narrow down your investment search. Would also narrow down a geographic location.
Be able to understand this situation. Given the same Dollar investment, same ROI, same Cap rate, etc. Why would you pick location A over B? Future value growth, stable market areas (college, government, airports, hospitals, etc). More square footage, more parking, better road access, next to anchor businesses that compliment yours.
Define the above to help you and your realtor narrow your focus.
Don't recommend you approach this from a purely financial Target standpoint and end up with a mixed bag of investments, unless that is part of your investment strategy.
12 Replies
Hi @Michael Kim,
You aren't wrong. Some of the best deals get traded through pocket listings and existing relationships. If you want to get into the NNN space, I would recommend getting more educated/familiar with NNN investing. Joel Owens did a podcast on BP on it and there are plenty of other resources.
For sourcing deals, I would use Costar, Crexi, Loopnet, etc. to find brokers who sell NNN deals and network with them. They won't give you first access to a homerun deal, but you may get first look at solid deals if they know you are ready and able to purchase. Once you've done repeat business and establish a track record, you'll get access to the better deals. For example, I have a friend in my market who sells NNN deals at a 7 CAP because he has closed every single one of them and he gets the PM fee on the backend (20+ deals and counting).- Irvine, CA · Member since 2015 · 29 posts · 4 votes5y
Thank you very much for the advise. It seems like the best way is to find a good broker that can get you deals. Besides using Costar, any other ways to find brokers? I have seen some online companies that advertise deals. are they worth looking into?
Originally posted by @Michael Kim:
Thank you very much for the advise. It seems like the best way is to find a good broker that can get you deals. Besides using Costar, any other ways to find brokers? I have seen some online companies that advertise deals. are they worth looking into?
Happy to help. I would look at LoopNet and Crexi as well. You can also look at the big CRE brokerages like JLL, Cushman, etc. With a little searching online, you can probably find a few shops that specialize in NNN deals near you. We have a few in the Carolinas.
Also, I’d recommend considering expanding you geography. NNNs are as close to passive as you can get without being an LP.
- 5yBen McMahonPro MemberInvestor · San Diego CA · Member since 2014 · 341 posts · 140 votes
If you are really interested, you can go the old fashion way. Find out who owns the building, contact them and see if they are willing to sell. You would be surprised how effective this can be. Especially right now.
Another thing that might make sense if you are utilizing agents is finding a newer CRE agent that is willing to pound the pavement for you. Older seasoned agents are going to be more in the deal flow, but like mentioned before are probably going to give first look to their buddies.
Also, You can look at your tenant pool first and bring your seasoned tenant into the deal. Lets say you know a small franchise that Covid didn't destroy and they want to expand. Its a great way into Commercial when you have your cornerstone tenant in the bag before the purchase.
- Irvine, CA · Member since 2015 · 29 posts · 4 votes5y
Those are great ideas. Thank you very much for the tips
- 5yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
Look at Loopnet, Google commercial real estate or MLS, drive in the area your interested and look at for sale signs. Find the top two most active Agents with the most listings. Go meet with them.
Bring along a deal sheet defining the property types your looking for. Have a letter from your Financial entity saying your good for $xxx,xxx.
You want to catch the deal as it comes to their table, and before they list it. As mentioned above they get both sides of the commission and also they do very little work, if not listed. And can do more deals.
If you can be more descriptive of the type of CRE you are looking for, the folks here can give better info or recommendations.
- Irvine, CA · Member since 2015 · 29 posts · 4 votes5y
Hi Henry,
Thanks for the great advice. Any advice on finding brokers? Ive been just cold calling those with listings but no luck so far.
We are looking for NNN, 3-4 million range, cap rates in 5's (will consider 4's also), but most impt is finding a good/stable tenant that will be around for another 20 years. This will be our first deal and we are testing out the waters before we jump into more. Therefore we want to make sure this first is not a failure, thus we would be willing to accept lower returns for the stability.
- Rental Property Investor · Southern California · Member since 2019 · 10 posts · 2 votes5y
We found a terrific seller's broker, believe it or not, through the tenant in our home (a duplex.) I don't know if he wants publicity, but I'm happy to DM you his contact info. He sold our owner-occupied small commercial, and presented us with potential 1031 investments up until we decided to invest in more residential. If I were going back to commercial, I'd engage him in a heartbeat.
- Irvine, CA · Member since 2015 · 29 posts · 4 votes5y
That would be awesome. I really appreciate that.
- Real Estate Agent · Tustin, CA · Member since 2021 · 1 post · 0 votes5y
@Michael Kim
I'm a commercial agent with CBRE in Orange County. I may be able to help or point you in the right direction. I'll message you.
Taylor
- 5yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
Recommend you put more thought and description into the type of CRE. This will help both you and the realtor to focus.
Retail store fronts, offices, Medical complexes, Storage, Truckstops, Parking lots, bowling alley, Governmental, contractor buildings, etc. Narrow down your investment search. Would also narrow down a geographic location.
Be able to understand this situation. Given the same Dollar investment, same ROI, same Cap rate, etc. Why would you pick location A over B? Future value growth, stable market areas (college, government, airports, hospitals, etc). More square footage, more parking, better road access, next to anchor businesses that compliment yours.
Define the above to help you and your realtor narrow your focus.
Don't recommend you approach this from a purely financial Target standpoint and end up with a mixed bag of investments, unless that is part of your investment strategy.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes5y
I have already conversed with Michael.
I don't like medium to big groups. You have to get everyone to agree to invest at the same time, with the same location, with the same tenant type, with the same loan terms, the same yield, same general exit times, etc.
As one listing broker said to me 30 years in the business he doesn't like dealing with groups as it's like herding cats.
Right now the good properties are getting multiple offers. Knowing how to make the offer stand out and win the deal comes with experience and time. It's not always cap rate and price either. With sellers surety of close is very important.
I am not saying it is not possible to successfully purchase with a group just much, much harder.
Buyer broker and sellers brokers want easy for transacting. They like the plain old vanilla buyers. Strong net worth single buyer, strong liquidity, understands the asset class and has a history of closing deals or is working exclusively with a broker who does, etc.
Volume listing brokers I have found most of them don't like working with buyers which is why they go after listings. The tend to give buyer leads to the grunt agents on their team with limited experience at their firm and say see if you can make something happen. Then they try and talk unsuspecting buyers into crap deals that have weak locations, leases, tenants, etc. that couldn't sell to the experienced buyers and brokers.
Nobody wants overpriced trash whereas loss of capital is high and long term upside is very low to slim. Developers love to sell off marginal tenants at inflated rents to newbie buyers. Guess what tenant goes out in a few years and now you are left releasing the dark space at much less rent per ft than the market and your down payment and equity is GONE.
Owning NNN is passive but there is an art to the process of buying it. Buyer contacting listing brokers wanting to ask a thousands questions is a waste of time. Those brokers are knee deep in deals. To the other poster saying find a grunt to do lots of work. Sure but they won't have hardly any knowledge at all with NNN.
The busy brokers are making millions per year in commission. Buyer brokers want an exclusive commitment. Listing brokers want an exclusive listing agreement. Those brokers that are already wealthy do not work under other conditions. The newer brokers with limited wealth, business, and experience can go be someone's errand boy for peanuts.
I have my ideal client. I don't care if they are worth 100 million as an individual. If I do not like the way they do business, treat people, etc. then I tell them to get lost. There are millions of millionaires in the U.S. Plenty that fit my ideal client profile.
I find some buyers do searching, and searching, and searching on their own, spin wheels, and don't do anything.
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