All Forum Posts by: Alex Vela

Dennis,

What kind of commercial property?  I am an office building property manager and would be happy to help but my knowledge is somewhat limited to office buildings.  

Good luck. 

I know this thread is a not recent but I am faced with the same situation.  @Carolina E., how did you end up handling this?  Did you ask for paperwork proving he has to pay? 

My thought is to add him as a co-signer.  I will be receiving rent from her and not him directly but he passes the financial requirements (well into the 6 figures) while she is currently unemployed (looking for work, she says). 

Thanks for your help.

@Amr Omar

Welcome to BP.  I am also in Cobb County.  I'll be at the meet up on Monday so hopefully, I'll see you there. 

@Jeff Botheroyd

You mentioned you were looking for a rental.  You will find it difficult to get conventional financing on a rental property in an LLCs name.  Lima will only lend for a short term at a high interest rate so you will want to get out of that loan as quickly as possible. 

Banks will require a seasoning period, which can be up to a year, but will more than likely want the title in your name and not your LLCs name.  There are numerous posts about getting conventional financing in an LLCs name on BP so you should check them out. 

I am not an expert on the subject but have found that any bank willing to finance in your LLCs name will have less favorable terms than a conventional loan.  Make sure you have your exit strategies before you purchase any property. 

Good Luck!

@Jeff Glinski

While the structure of the building is important, prospective tenants fall in love with the building much like someone buying a house.  The prettier the building, the easier it will be to sell to the tenants.  I agree with @Leon D. comments about landscaping, parking lot, lighting and interior common areas such as the building lobby and restrooms.  I like the idea of signage too.  Those are the first things a prospect sees when they drive up to the building.  I'm not saying a good roof is not important but all buildings have working roofs so that shouldn't be anything special.  If you don't have leaks, don't touch it.

I work in a Class A office building and I don't have any experience in Class B or C but I would think you find tenants the same way.  Find a broker that only gets paid when they lease the space.  They can also provide some guidance on where to start with the renovations. 

I hate to say it but you are going to have to spend quite a bit of money on the building to get it in good shape if you want good tenants that pay high rates.  Strategies are similar on the residential side.  Make sure you screen your tenants (review financials, secretary of state filings, etc.) before you sign a lease. 

You will really need a strategy on how you will tackle all of this.  It might take a multi-year project to really get the building in good shape. 

Good luck. 

@George Flevotomos

One of the main ways we save money is to competitively bid all service contracts (landscaping, security, window washing, janitorial, etc).  When you competitively bid every 3 years or so, the contractors usually sharpen their pencils.  We lock in rates for 3 years so we get today's pricing in the future.  That doesn't always work out but sometimes you get lucky. 

Paper products is a huge expense for us in an office building.  Shopping the pricing can help reduce some but you need to find ways to reduce usage.  For example, you can use coreless toilet paper so there is more toilet paper on the roll.  You can also have the janitorial staff leave the roll on there until it is empty.  Sometimes they throw them away before they are completely used.

Electronic paper towel dispensers also help.  You can control how much comes out at any one time.  Changing soap dispensers can also help.

These are simple fixes.  There are more intense capital projects that could yield more savings.  I bet you are spending the most money on electrical consumption.  Lighting usually creates the highest consumption in most buildings.  You can look at lighting retrofits or lighting control panels that shut off the lights in the building after business hours.  You can also ensure that whoever is last in the building is turning everything off.  Sometimes that is the cleaners or security personnel.  Another major contributor is your hvac system.  Does that run 24/7?  It should never.  Do you have a good maintenance program so the equipment is operating efficiently?  Is it time to upgrade to more efficient equipment.  Can you control it remotely so you can shut it off when it is not being used?  Low flow faucets, toilets, urinals?  Aerators on the faucets?  Be careful with low flow toilets.  That could cause a mess. 

I work in an office building so some of my recommendations may not apply to retail or industrial NNN buildings.

The key is to study what you are spending the most money on and get creative. 

Hope this helps. 

@Devonte Dinkins

I am of the mindset that you want to do business with people you like so find a broker you like working with.  You should interview several.  Ask other property owners, to include the seller, in the area who they have worked with in the past or who they are currently working with.  There should be a commercial trade organization in your area that you can join or attend meetings.  BOMA is a big organization worldwide but I think they deal mostly with office space.  You can ask them about a retail trade organization. 

As important as your broker is your marketing plan.  Besides your broker, how are prospective tenants going to find your property?  A good broker can help you with that but you may want to consider a marketing firm that specializes in real estate. 

Good Luck. 

We typically create language in our leases that allows us to capture additional expenses above and beyond their gross amount and we don't limit it to taxes. 

We split up the expenses as controllable and non-controllable.  Controllable expenses are maintenance, landscaping, etc.  Non-controllable are taxes.  Sometimes, tenants ask us to cap the controllable expenses. 

When setting your gross rent/sf, it is important to know what your expenses are for that given year.  As Joel mentioned, the key in gross/base year leases is to keep expenses as low as possible.  The spread between what you are charging and what you spend is yours to keep at the end of the year. 

You also need to consider what is typical in your market and structure your leases in accordance with local customs.  In Atlanta, we do a lot of gross/base year leases. 

Good luck. 

@Tommy Conner.  Did you ever find someone in the East Cobb area?  I live there too and would like to find someone local instead of across town.  If you did, would you mind sharing?

Thanks.  

@Russell M.  Thanks for sharing your spreadsheet.  You have a lot of detail that will help us new guys out.  I quickly went from 1 to 3 rental units and am trying to make sure I keep everything organized.  Your tracker will definitely help.