All Forum Posts by: Dan Biber

First, you'll need to expand what "wealth" means to you.

Lots of cash in the bank, high net worth, financial freedom, generation wealth, less work/more free time, etc, etc.

Thanks for reading.

Dan Biber

Sounds like a great project. Here are my thoughts:

A - Many cities and counties love the mixed-use idea and push developers to provide street commercial space.  If zoning is not finalized yet, I would suggest persuading the city/county to provide a zoning condition which allows you to convert ground floor into residential units (rent/for sale, studio/1 bed, etc.) or work/live studio.  Depending on your market, it might be challenging to fill the commercial space.  Also, what kind of commercial space is important - commercial office, retail, restaurant.  If restaurant, keep in mind mitigating noise and smell to condos above. Service type tenants are Amazon proof and will fare better.  Barbershops, nail salons, grocery, etc.

B - Yes, I imagine the lender will give you a construction loan, which you'll have to re-finance out of into something more permeant for the commercial space.  They might require a certain % of pre-leasing condos as condos have been traditionally seen as a riskier product types (post 2008 recession). Consider local/community banks and credit unions.  

C - You can obtain non-recourse construction financing, which will allow you to attract some partners, KP's, etc. whose risk to sponsor the loan will be reduced. 

Thanks for reading and good luck,

Dan Biber

Great question.  Here's what I would do in Atlanta:

1. Pull up data on properties that are 4+ units from public records and call & send letters to those landlords.

2. Go to FMLS & GAMLS and reach out to all of the agents that have sold properties that are 4+ units.  

3. Go to Zillow.com, FMLS, GAMLS and and search rental units that are part of the 4+ unit property.  Reach out to those landlords or their property manager.

Thanks for reading.

Dan Biber

Agree with Greg Dickerson.  It's all negotiable and based on sub-market conditions. Also, it depends on the type of commercial space (office, retail, industrial, etc.)  Here are few examples from Metro Atlanta market for commercial office space.  First generation space, Class A, Midtown sub-market - $60-80/RSF TIA.  Second generation space, Class A, Sandy Springs sub-market - $30-40/RSF TIA.  Condition of space plays a factor too.  First generation, second gen, whitebox, spec. suite, etc.  Typically, we do a test-fit for the prospective tenant, get a construction budget and negotiate from that.

Thanks for reading.

Dan Biber

Tim,

If you like multi-family and self-storage in addition to QOZ, I would suggest investing with a seasoned sponsorship group and let them do the heavy lifting.  Unless this is your full time gig, investing as an LP is the best course of action. We pursued a QOZ deal in Chattanooga for a mixed-use 141 acre project and spent over $100k in legal fees alone to help us navigate the complexities of OZ law.  The ideal OZ's are clearly the locations where development/redevelopment has already been ongoing, even before the law.  This is a riskier investment since there's no guarantee that in 10 years when you're planning to exit the deal, the geographical area has become a valuable location with strong demand to acquire real estate.

Thanks for reading.

Dan Biber

@Josue R.

Real estate investing/landlording is not rocket science.  Yes, COVID adds a layer of risk that certainly needs to be managed as other risks associated with RE. I'm in Atlanta and for us, location, population, jobs and diversity of jobs are clearly the key factors in mitigating COVID-19.  Bought a townhome few weeks ago for $10k more than asking price with over 30 offers situation.  However, due to above mentioned factors, got rented out in 1 week.  Closed on 48 unit multi-family community last month.  With strong jobs and employer diversity, over 90% of the tenants are back to working.

Thanks for reading,

Dan Biber

@Payzulla Namat, I would suggest as a new investor that you gain knowledge through education first, before investing your hard earned money and potentially losing it.  From a commercial RE perspective, I would suggest looking for opportunities that are less risky in today's environment: industrial, mobile home parks, self storage.  Office, retail, Class A multi-family pose a higher risk.  Experienced investment groups/developers will be looking at retail shopping centers as redevelopment opportunities; especially if vacancy is high.  Redevelop into multi-family, townhomes, smaller scale mixed-use (small boutique office building, some retail outparcels, maybe entertainment, majority would be mixed residential (townhomes, condos, detached, MF)  We looked at 100k SF shopping center before COVID as a redevelopment opportunity, but the asset was 90% occupied and it was challenging to underwrite a market value purchase price for the asset as a complete tear-down.

Thanks for reading.

Dan Biber

@LaRhonda M, great questions. I use a multi-step approach to vet a potential passive investment opportunity.  

1. The sponsor.  Their track record, experience, background, education, etc.  

2. The location of the deal.  Market condition, jobs, population, etc.

3. The business plan, financial underwriting, etc.  Drill down and ask question about all of the assumptions the sponsor plugs in their underwriting model.  More fiction is written in excel than in word.

Sounds a like an aggressive multi-family flip if the hold period is only 2 years. Maybe the sponsor would do a cash-out refinance at 24 months and hold it for another 3-5 years, making the total hold period 5-7 years. That would be more realistic. However, if the projection is 25% IRR for passive investors, that would certainly raise red flags since that's a high in today's hot Atlanta market.

Thanks for reading.

Dan Biber

Yes, certainly check the local codes.  What will be included in the airbnb kitchenette?  I ask because I've seen units in Atlanta with a sink and stove.  No dishwasher, no microwave, no hood.  I would suggest to make sure that when you apply for your permits (if any) that you state that it's an existing residential multi-family building.  First, because that's what it is.  Second, because many jurisdictions have an entire section in the zoning ordinance about kitchen vs. no kitchen hotels and that can open you up for all kinds of delays, zoning hearings, public input, etc.

Does the 6plex have one parcel ID?  If so, lenders will treat it as a commercial asset and you have to go with a local community bank, credit union, maybe Freddie Mac SBL if loan amount meets their criteria, private lenders (Lima One, CoreVest, Lending One, etc.) depending on your business plan/strategy.  

Thanks for reading.

Dan Biber