All Forum Posts by: Brett Peters

@Jonathan Scheeler Greetings Jonathan, and I am sorry to hear about your troubles. Your post hit close to home...literally. I am a commercial realtor located in Lancaster Pa. I actually used to be in the Investment Sales department at Slatehouse prior to switching to another brokerage for the same reasons you have mentioned (without going into too many details). I would recommend YRG (Younger Realty Group). If you send me a message I will provide you with the contact info for someone I can vouch for. Best Wishes!

@Michael Leeson I am a commercial agent from the PA area. In reference to the commercial units, the most important thing to consider here is the zoning. Reason being, you can simply convert the unit into something that is less impacted by the current state of affairs. Research the zoning map and find out what are all the permitted uses that you can deploy. It may be as simple as converting office to retail or just converting the whole thing into residential. As for the going rate, that depends heavily on the class of the space as well as the sf. As has been mentioned, a local commercial broker or agent can answer this due to the fact that this varies heavily between markets.

@David Zipparo I have completed all CCIM educational requirements with the exception of 102 which I will be taking in September. I went from 101 to Negotiations to 104 to 103 and in the midst of that did the supplemental courses. Would love to discuss the content.

@Matthew Allen I am not seeing anything lower than 4% at the moment. More frequently I see 4.25%

@Yoni R. Thank you for your kind words. I'm glad I can be of some benefit. So the current tenant is on what's called a "Modified Gross" lease. It is uncommon but not unheard of. In this case, you really want to nail down whether the water and insurance are completely passed through to the tenant, or if its is pro rated based upon their usage of the space (which is common practice). If it is prorated it will impact the numbers in your analysis because you are sharing in the expense. Especially due to the fact that the building is not fully occupied and that would mean that the tenant or the landlord will be taking responsibility for the pro rated share of the expenses for the unit that is vacant. A huge point here is to find out whether the building is separately metered. If not you may have to sift through the details in the lease and see some of the owners past billing statements to make sure this was done correctly so you or the tenant are not paying more than is necessary. (This can be tricky business). 

The fact that this was a sale leaseback is some good news though. In this situation tenants are usually very low maintenance and tend to have a non-tangible stake in the property. It wouldn't hurt to find out a little more about their business though. A sale leaseback is a strategy to (raise capital). This could be part of their liquidation process and next they may be selling the business altogether. Hence why they are on a yearly lease! 

Your numbers look good overall. We would need to answer questions around the expenses I mentioned earlier as well as choose a vacancy rate and make a decision on management. Also, factoring in your debt service to realistically see how this property is going to cash flow both before and after tax. From here there is a more advanced method where we can discount the cash flows backward (NPV Method) and reach a purchase price number with all things considered. But overall you seem to be on the right track. 

Without MLS access it will be difficult to comp out the lease rate for this space. But a hack would be to call a commercial property management company and ask them. That would give you exactly what you need! (You could even mention that you may consider using them to manage the property). I can assist at an advisory capacity for anything except market analysis in that area. Due to the fact that you would be better served by someone who knows the territory first hand. But I am more than happy to help with any type of financial or lease analysis. Hope this helps!

@Yoni R. I am a commercial agent from the PA area and I do deal with a fair amount of industrial warehouse space. It sounds to me like the current tenant is on a NNN lease. However, the fact that they are on a yearly lease should cause some concern. In the current climate, it is not easy to get commercial leases done and if that tenant goes dark or decides to leave you could be looking at holding the space for about 6-9 months to find a new tenant. I would suggest attempting to get at minimum a 3 yr, lease signed. As for the second floor unit, is this all office or is it also warehouse with office? I can tell you from experience office leasing is extremely difficult at the moment. The most important piece of advice I can give you is to check the zoning for the parcel and see all of the possible permitted uses that you can use at the location. That way you will know whether you can convert the unit to a higher and best use in the event circumstances change.You will also want to contact a commercial agent in your area to perform a financial analysis on this. Since the property is 40% vacant you will be in the 25-30% down range and you want to make sure you are being compensated for the additional risk you are shouldering in this situation. Cap rates will vary by area but you will likely be in the 5-7% range. Make sure the cap rate you are buying is based upon current performance and not pro-forma.All in all this doesn't sound like a bad deal but due diligence is imperative as this property type is nothing like MF.

@Gearold White I am both a licensed comm agent and an investor. If you want to be fully autonomous from the brokerage scene but still want to be licensed you should go to what's called a 100% brokerage. These are usually relatively smaller firms but essentially you will have to pay a flat fee every month to the brokerage, say $400 (this will vary) and you will literally have no expectations or oversight on hours or deal flow. 

@Mathieu Roegiers From my experience, your best move in this scenario is to either make an amendment to the agreement of sale or redraft it completely. When you plan on putting a property into an LLC that is not ready, you want the name section of the agreement of sale to read, for example "Mathieu Rogiers assigns...". To ensure that you will not have to pay a double transfer tax. At that point you will at least have a legally binding agreement that will allow you a smooth transfer. Then push the date of settlement as close as you can to the date you believe the Tax ID will arrive. As for commercial rates I am seeing 4.25% with 20-25% LTV.

@Cailyn C. In my experience, you will be in the 20-30% range at 1-2 million. When you start getting into the 4's you can get that down to 15%. However, the real key here is not the price range but rather your own financials. Banks offer special programs with lower down payments to people who maintain either a certain account balance, or can prove a certain net worth. For example, in my area there are banks that will give you 15% down on a relatively large transaction if you have a savings account balance (with their bank) of 200k plus. If you have a good relationship with your bank you should ask them about what programs they have available. If they don't have any, switch banks.

@James Tedrow It's never been easier to decide where my vote goes!