Rental Property Investor · Milpitas, CA · Member since 2019 · 12 posts · 7 votes
Hi All,
I'm a SFH rental investor currently learning the property analysis process for commercial apartments. In the residential world, I can easily get all the information I need to qualify if a deal is worth looking at in person (e.g. open house) just from online information from sites such as Zillow. Real Estate agents are happy to share info too regardless if you've ever bought a house or not before.
In the commercial apartment world, you need at least the T12 and rent roll to be able to do the initial analysis to qualify a deal. I understand that this is something owners would have and are typically made available by brokers to potential buyers, I was just wondering if anyone has advice/tips on how someone new (with no commercial experience) could get access to this data in order to do initial analysis to qualify deals? I found it pretty difficult to find who owners of properties are in many areas via online search, and I don't see why any commercial brokers would want to share this information unless they believe you are a serious buyer (e.g. experienced) who can close the deal as the information is not meant to be public.
In an ideal world, I'd want to get my hands on all the T12s and rent rolls for at least the on-market deals in order to qualify deals based on my criteria and then partner up or pass on deals to an interested team who can pursue and close on the deal. Thanks!
I completely agree with @Greg Dickerson. Get really good at understanding the business and terminology first before contacting brokers and owners. They will take you more seriously and be more willing to give you access to information you request.
I also urge you to take a step back for a moment. Most commercial apartment deals especially publicly posted on sites like LoopNet are not worth deeply evaluating. Seek to do a very quick 60-second analysis of apartment deals first, and if they meet your criteria during that initial scan then dive deeper, but if not, then move on. This will save you a tone of time!
Here is a quick way I run the numbers to see if a deal is worth looking deeper into or not:
1) Find the Income: You can do this by taking the annual income of a property and subtract a - 5% vacancy factor. (i.e. $100k - $5k = Income of $95k)
2) Determine the annual expenses using the 50% rule - which states the generally the expenses on a property will amount to about 50% of the property income. (i.e. $95k * 0.5 = Expenses of $47.5k)
3) Calculate the Net Operating Income or NOI = Annual Income - Annual Expenses. (i.e. $95k - $47.5k = NOI of $47.5k)
4) Determine the cap rate. Hopefully it’s listed for the property if you're looking on LoopNet, but if not you can find it a couple different ways.
- If you know the asking price for the property then you can do (NOI / asking price) = cap rate
- If price is not listed then you can look for active brokers in your general area with apartment listings and give them a call. Take this as an opportunity to start build a relationship with them (key for future business success) and casually work into the conversation ‘what’s the cap rate in this area?’
5) NOI / Cap rate = Purchase Price (i.e. if we had a 5% cap rate then, $47.5k / 0.05 = $950k purchase price)
If all the information is present then the above only takes about 45 sec.
Spend the last 15 sec. comparing your purchase price to the seller’s asking price if it’s listed. If it’s not listed then pull up a tax assessment on the property to get a ballpark number from the assessed value.
Typically if the purchase price I calculate is within 25% or less of their asking price then I put that property on a list (excel spreadsheet) to do a deeper dive into later. (i.e. if the sellers asking price is $1.1 Million for the analysis above and you calculate a price of $950k then you know you're within 15% of their asking price, so it's worth taking a deeper dive.)
If this number is greater than 25%, it will be tough to underwrite the property in a way that creates a good ROI, but also will be considered by the seller.
6) Rinse and repeat for all the listings you can find.
7) When you have your new list of properties that passed the first screening criteria, then I evaluate value add opportunities.
8) If you find properties on your new list that you're interested in pursuing at this point, then you dive in to contact the brokers or sellers for their T-12. You can discuss your initial analysis of the property and tell them you need to see the T-12 and rent roll in order to provide them with a more accurate offer.
Danny, I hope this helps you hone in your commercial apartment analysis process! If you have questions on any step, please feel free to reach out.
Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
7y
Sometimes that information is included in the offering memorandum sometimes not. You can start but checking out properties on LoopNet and looking at the info and offering memorandums there to start evaluating and understanding numbers. The other way is to contact the listing broker and ask them to send you the info so you can evaluate the deal if you are seriously interested and think you can make something happen with it.
You can find the owners of commercial properties the same way you do single-family homes. Look the property up in the tax database. If the ownership is a CORP or LLC then you can do a reverse address search to look up the phone number or just send a letter.
More importantly make sure to educate yourself thoroughly first. Before you speak to owners or brokers you need to have a really good understanding of the business and the terminology.
Investor · Stratford, CT · Member since 2015 · 258 posts · 230 votes
7y
@Danny Kao - Often the T12 and rent rolls are only provided as part of the due diligence process after signing the purchase/sale contract. Many owners don't want to disclose their personal business to folks who are just looking or evaluating deals.
Real Estate Broker · Minneapolis, MN · Member since 2016 · 530 posts · 398 votes
7y
Agree with @Ed Matson Sometimes, but very rarely, at least the rent rolls will be included in the Offering Memorandum. Of course remember to screen the actual leases and maybe even bank statements to supplement when you do receive them!
Rental Property Investor · Milpitas, CA · Member since 2019 · 12 posts · 7 votes
7y
@Greg Dickerson Thanks for the advice. I am planning to fully understand the terms and formulas used for evaluating and closing these types of deals. I think my best bet is to get experience by being an LP as well as through a mentor and network with others to get up to the point where I can prove I can make something happen to brokers/owners.
Rental Property Investor · Milpitas, CA · Member since 2019 · 12 posts · 7 votes
7y
@Bjorik Mutize Thanks for the advice. I wanted to get familiar with the initial qualification of a deal prior to the offer and due diligence process, I’ll definitely remember those things when it come time to finalize a deal.
I completely agree with @Greg Dickerson. Get really good at understanding the business and terminology first before contacting brokers and owners. They will take you more seriously and be more willing to give you access to information you request.
I also urge you to take a step back for a moment. Most commercial apartment deals especially publicly posted on sites like LoopNet are not worth deeply evaluating. Seek to do a very quick 60-second analysis of apartment deals first, and if they meet your criteria during that initial scan then dive deeper, but if not, then move on. This will save you a tone of time!
Here is a quick way I run the numbers to see if a deal is worth looking deeper into or not:
1) Find the Income: You can do this by taking the annual income of a property and subtract a - 5% vacancy factor. (i.e. $100k - $5k = Income of $95k)
2) Determine the annual expenses using the 50% rule - which states the generally the expenses on a property will amount to about 50% of the property income. (i.e. $95k * 0.5 = Expenses of $47.5k)
3) Calculate the Net Operating Income or NOI = Annual Income - Annual Expenses. (i.e. $95k - $47.5k = NOI of $47.5k)
4) Determine the cap rate. Hopefully it’s listed for the property if you're looking on LoopNet, but if not you can find it a couple different ways.
- If you know the asking price for the property then you can do (NOI / asking price) = cap rate
- If price is not listed then you can look for active brokers in your general area with apartment listings and give them a call. Take this as an opportunity to start build a relationship with them (key for future business success) and casually work into the conversation ‘what’s the cap rate in this area?’
5) NOI / Cap rate = Purchase Price (i.e. if we had a 5% cap rate then, $47.5k / 0.05 = $950k purchase price)
If all the information is present then the above only takes about 45 sec.
Spend the last 15 sec. comparing your purchase price to the seller’s asking price if it’s listed. If it’s not listed then pull up a tax assessment on the property to get a ballpark number from the assessed value.
Typically if the purchase price I calculate is within 25% or less of their asking price then I put that property on a list (excel spreadsheet) to do a deeper dive into later. (i.e. if the sellers asking price is $1.1 Million for the analysis above and you calculate a price of $950k then you know you're within 15% of their asking price, so it's worth taking a deeper dive.)
If this number is greater than 25%, it will be tough to underwrite the property in a way that creates a good ROI, but also will be considered by the seller.
6) Rinse and repeat for all the listings you can find.
7) When you have your new list of properties that passed the first screening criteria, then I evaluate value add opportunities.
8) If you find properties on your new list that you're interested in pursuing at this point, then you dive in to contact the brokers or sellers for their T-12. You can discuss your initial analysis of the property and tell them you need to see the T-12 and rent roll in order to provide them with a more accurate offer.
Danny, I hope this helps you hone in your commercial apartment analysis process! If you have questions on any step, please feel free to reach out.
Rental Property Investor · Milpitas, CA · Member since 2019 · 12 posts · 7 votes
7y
@Jorjio Hopkins Great info, thanks so much! I’m early in the learning process so definitely not planning to ask brokers/owners for any information until I’m at a point where I can do something meaningful with them.
Rental Property Investor · Milwaukee, WI · Member since 2017 · 77 posts · 86 votes
7y
@Danny Kao Well just stay persistent and continue taking action, analyzing and educating yourself. Also, don't be afraid to start a conversation with a broker. They are people too, and you want to build the relationship well before you actually need them.
Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
7y
You don't need the T12 and rent roll to do an initial analysis, just ask them for their #s. It is not that hard; really.
I would suggest just a call/voice message/email and something like. "Hi, Joe Schmoe here. Do you have a few seconds? We are looking at investments in the area and I was hoping you could send me the high level financials on the XXX st property? Thanks." Or " could you give me the basic NOI on XXX..." Thats it.
And as you talk and if there is a rapport, you could also ask if the owner uses property management, who pays utilities, improvements etc. They should be able to tell you that off the top of their head. Take the tone that you are working together to make sure you don't waste each others time.
Now, I wouldn't take these #s at face value if you move forward, but you could apply any percentage of skepticism you choose until you see the actual numbers and verify them.
And get them talking more than you. " Hey, I know you represent the seller but I know you also likely know this market better than I do. What's YOUR take on the general area and the advantages this property has over others?"
You don't have to agree with anything they say, but you will get a lot of useful information. Be curious, be professional, be brief.
Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
7y
You don't need the T12 and rent roll to do an initial analysis, just ask them for their #s. It is not that hard; really.
I would suggest just a call/voice message/email and something like. "Hi, Joe Schmoe here. Do you have a few seconds? We are looking at investments in the area and I was hoping you could send me the high level financials on the XXX st property? Thanks." Or " could you give me the basic NOI on XXX..." Thats it. On a message I would probably add "happy to sign an NDA"....signals you understand need for confidentiality and are at least versed in the lingo. They probably won't even ask you for one, at least for the big picture stuff.
And as you talk and if there is a rapport, you could also ask if the owner uses property management, who pays utilities, improvements etc. They should be able to tell you that off the top of their head. Take the tone that you are working together to make sure you don't waste each others time.
Now, I wouldn't take these #s at face value if you move forward, but you could apply any percentage of skepticism you choose until you see the actual numbers and verify them.
And get them talking more than you. " Hey, I know you represent the seller but I know you also likely know this market better than I do. What's YOUR take on the general area and the advantages this property has over others?"
You don't have to agree with anything they say, but you will get a lot of useful information. Be curious, be professional, be brief.
Rental Property Investor · West Palm Beach, FL · Member since 2017 · 262 posts · 136 votes
7y
@Danny Kao I would suggest finding apartment buildings in your area and then looking for "for rent" ads and then contacting the property manager. You should be more concerned with understanding what the market rent is for a particular type of property (1 bedroom vs 2 bedroom, etc). The information online is not always accurate. Let the property manager know you are an investor trying to get an idea of what market rents are because you are looking to acquire an apartment building. This will be useful as well because you are able to see which property managers are most accommodating to give you this information and that will be useful when you are deciding which property management companies to interview.
@Jorjio Hopkins makes a good point as well because you do not want to be caught off guard when a professional starts using basic lingo that you do not understand.
Rental Property Investor · Milpitas, CA · Member since 2019 · 12 posts · 7 votes
7y
@Allyssa Mccleery Great idea, I think property managers are definitely useful team members I can start engaging earlier on in my learning process. Thanks!
Rental Property Investor · West Palm Beach, FL · Member since 2017 · 262 posts · 136 votes
7y
@Danny Kao Definitely. I have also set up a CRM software I use to connect with certain property managers every two months to see if they know of any property owners who may be looking to sell as well as getting their opinion of any changes in the market. You can also keep notes of your conversation with their contact. Good luck!
I'm a SFH rental investor currently learning the property analysis process for commercial apartments. In the residential world, I can easily get all the information I need to qualify if a deal is worth looking at in person (e.g. open house) just from online information from sites such as Zillow. Real Estate agents are happy to share info too regardless if you've ever bought a house or not before.
In the commercial apartment world, you need at least the T12 and rent roll to be able to do the initial analysis to qualify a deal. I understand that this is something owners would have and are typically made available by brokers to potential buyers, I was just wondering if anyone has advice/tips on how someone new (with no commercial experience) could get access to this data in order to do initial analysis to qualify deals? I found it pretty difficult to find who owners of properties are in many areas via online search, and I don't see why any commercial brokers would want to share this information unless they believe you are a serious buyer (e.g. experienced) who can close the deal as the information is not meant to be public.
In an ideal world, I'd want to get my hands on all the T12s and rent rolls for at least the on-market deals in order to qualify deals based on my criteria and then partner up or pass on deals to an interested team who can pursue and close on the deal. Thanks!
Good to meet you.
Finding owner info is fairly easy... there is a product which is free by First American Title Called FAstWeb... sign up for it..
Rent roles by area is also easy using this link. Data
As for a proforma, that usually comes during and after contract negotiation.
You can get this information directly from the broker for the property you are interested in. Generally they will make you sign a CA (Confidentiality Agreement).
If you don't want to be calling brokers, I would recommend looking at Loopnet, CRExi or some of the other commercial websites. Also, as another bonus, a lot of brokers on Loopnet or CRExi may not directly include the information you want but will include a link to their website. You can sign up and get the information there.
Finally, keep in mind that these brokers are trying to sell the property they have listed. As long as you know the lingo and are knowledgeable in what you are looking for then that's the majority of the battle, in my opinion. Hope that helps!
I'm a SFH rental investor currently learning the property analysis process for commercial apartments. In the residential world, I can easily get all the information I need to qualify if a deal is worth looking at in person (e.g. open house) just from online information from sites such as Zillow. Real Estate agents are happy to share info too regardless if you've ever bought a house or not before.
In the commercial apartment world, you need at least the T12 and rent roll to be able to do the initial analysis to qualify a deal. I understand that this is something owners would have and are typically made available by brokers to potential buyers, I was just wondering if anyone has advice/tips on how someone new (with no commercial experience) could get access to this data in order to do initial analysis to qualify deals? I found it pretty difficult to find who owners of properties are in many areas via online search, and I don't see why any commercial brokers would want to share this information unless they believe you are a serious buyer (e.g. experienced) who can close the deal as the information is not meant to be public.
In an ideal world, I'd want to get my hands on all the T12s and rent rolls for at least the on-market deals in order to qualify deals based on my criteria and then partner up or pass on deals to an interested team who can pursue and close on the deal. Thanks!
Good to meet you.
Finding owner info is fairly easy... there is a product which is free by First American Title Called FAstWeb... sign up for it..
Rent roles by area is also easy using this link. Data
As for a proforma, that usually comes during and after contract negotiation.
Happy House Hunting
Hi Michael,
Thanks for the info. I'll check out FastWeb. As for the rent roll I wasn't looking for generic rent prices by area, but specific rent information for an apartment building for qualifying a potential deal.
You can get this information directly from the broker for the property you are interested in. Generally they will make you sign a CA (Confidentiality Agreement).
If you don't want to be calling brokers, I would recommend looking at Loopnet, CRExi or some of the other commercial websites. Also, as another bonus, a lot of brokers on Loopnet or CRExi may not directly include the information you want but will include a link to their website. You can sign up and get the information there.
Finally, keep in mind that these brokers are trying to sell the property they have listed. As long as you know the lingo and are knowledgeable in what you are looking for then that's the majority of the battle, in my opinion. Hope that helps!
Hi Chase,
Great info. I'm currently in the learning phase. I'm very curious and nervous to see how real world numbers and interactions are like in my own local area. Reading examples from books is great for learning, but being able to apply it is much more exciting!
Check loopnet.com. Some of the listings have OM that provides T12 and rent roll. If its not there, then you can always message the listing broker to request the information. The broker will typically have you sign a confidentiality agreement before they give you access to the information. What markets are you looking at?
Rental Property Investor · Milpitas, CA · Member since 2019 · 12 posts · 7 votes
7y
@Simon Chan Hi Simon, no specific areas yet, still learning the ropes and curious to analyze various markets myself to see how the numbers look before setting my focus on one. I’m planning to passively invest on the LP side as well as network with others while I get more comfortable in this area.