starter on commercial real-estate needs advice

[Brandon Won]

Hi,

I'm new to commercial real estate and have about 170k cash and a 780 credit score and no debt. My background is finance, but have some experience in residential property. Can anyone give me some direction where I should start researching on investing commercial real estate?

Thanks,

BW

[Joel Owens]

Brandon,

Like some other parts of the country where you live it sounds like CAPS are low for multifamily as it has overheated on appreciation and speculation plays.

If you want more of a return say 9 to 10% annually then looking outside the state might make sense.

With 170k you could structure this way.

1.Find a free and clear property and put some down for a private note owner finance .

2.Line up lender finance but ask the lender if they allow the seller to hold a 10 or 15% second.

Generally a lender wants a 75% LTV.

The 170k you will need about 12k to 15k at least for due diligence.

Environmental phase one,vapor intrusion,site inspection,cost reserve stable,survey,appraisal,closing costs (title,transfer taxes,etc.).

So that leaves about 150k depending on what you set for reserves.

With you putting 25% down that is a 600,000 sales price.
Seller held second at 10% and you doing 15% down = 1 million purchase price

Seller holding a 15% second and you doing ten percent you are now at 1.5 million purchase price.As you can see leverage can greatly help you go into a much bigger property which grows your income stream faster if you to do right.

3.You can partner up with other investors to own a larger more quality asset and your equity share is spelled out in the operating agreement. Say you had 150k and another investor 300k.

You could leverage into a 4.5 million property putting 10% down and seller held 15% owner second with a partner doing their 300k.