All Forum Posts by: Ash Patel

I purchased a small strip center for $620k that I sold for $1m one year (cap gains) later.  The strip was mispriced by an inexperienced broker that was a friend of the owners.  With the operating income my net profit was almost $500k.  As much as I wanted to buy an exotic car, I put all the money in a multi-family syndication.  

@Lisa Rispoli - Very true.  My banker now throws RE and fun startups (i.e. breweries) my way.  Often when businesses go to him for SBA loans, he will get me involved as an investor and mentor.

I toyed with this idea when I purchased a vacant 10k sq ft office building.  I ended up leasing to 9 different businesses and the management overhead now is almost zero.  I have only been onsite twice the entire Summer.  I would imagine a work sharing space would be much more management intensive.  I also think the areas that would do well with work sharing are the area's where you would have no problem finding office tenants (high demand/low supply).  

@David Coronado - Get your hands on as many PPM's as you can and read the deal structures.  That will give you an idea of how different deals can be put together.

@Lisa Rispoli - Super small local bank with less than 3 locations is the way to go.  They like to build relationships early with high (potential) earners.  I would build loyalty with this bank and have them become your partners for a long time.   That strategy has worked out very well for me.  Hard money lenders are commodities, local banks are partners.

@Casey Miles, It sounds like your tenant may have been jaded by their last landlord.  Whenever I inherit a tenant, I always show a good faith effort.  Ask them when they need and be attentive to that.  Little things like re-striping a lot, upgrading ext lighting, fixing a sign go a long way in a new relationship.

I am assuming most of your communication with your tenant has been through email/text?  I would show up onsite and ease their concerns by letting them know you are an attentive landlord.  Communicate about the roof repairs.  Maybe do this over lunch.

Agree with @Orkeem Davis, mixed use are tough to get loans on.  Start with several local banks in close proximity to your property.  Lenders often feel better about properties that they can easily drive by.  I would forget all of the big banks, they suck at these.  

Keep in mind, because these are harder to finance, they should be a higher cap rate.

I would look to a local lender and throw them a bone such as refi'ing your other properties with them if they get this deal done.  I say it a lot but I would rather pay a little higher to know that my lender will always finance my deals.  I believe you should build a relationship with a good local lender.

I contact my lender when I am under contract then again when I know the closing date.  It's nice not to have to submit miles of paperwork with new lenders each time.

@Tony T.

(2) Are the cap rates in commercial similar to those in residential commercial?

no - they also vary from retail, office etc. NNN retail for a national tenant can be a 5 cap whereas a regional tenant can be a 9 cap.

(3) If someone is selling a commercial office building (for example) and has a 5 year renewal with the current tenant, why would they be selling if it's such a good deal?

Anything can happen and you are selling at the peak.  Its a "safe buy" and an easy sell.  If you have a vacant building, its typically worth less than the build cost.  If you just sign a proper tenant for five years, you likely doubled the value of your asset.

(4) If self managing, is there more or less work for commercial (non-residential)? I know there are NNN's where I guess there'd be almost no work, but are most NNN's or only a small percentage?

mom and pops will most likely not be full NNN. Bigger tenants often will. I have often started out tenants on a gross lease then over time thrown in common costs getting closer to NNN.

Bharath, I've had small office buildings and I think its best to do the work yourself.  Advertise with large signs, walk the neighborhood and let people know you are the landlord and are looking for a tenant.  If you are near the university, find a few marketing/RE majors and offer them a nice signing bonus if they find you a tenant.  Offer the same bonus to your existing tenant so they can pick their neighbor.

With a building that size, I don't know that you need a shared conference room.  

Is your common area parking arrangement a recorded easement?  If not, that can lead to future problems.