All Forum Posts by: Don Konipol
Don Konipol has started 222 posts and replied 5502 times.
Post: Medical Office Investment Group
#1 Innovative Strategies ContributorPosted - Lender
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Quote from @Bob Dole:
Quote from @Don Konipol:
I've owned a few medical office properties in the past. Minimum total price for a smaller, yet still "efficient" property would be in the $1,500,000 + range in the less expensive states. Financing of up to 50% at 2 or 3 % over "base rate" can be had. Any LTV over that would require hard money rates, which would make cash flow negative. So, if you are able to find a cash flowing property in a low cost area you would realistically need $750,000 plus emergency capital of your own money to do a deal that has any chance of success.
Most smaller medical office buildings were occupied by solo practitioners or small partnerships. In the last 5 years those are gone, ALL medical practices are now part of major group practices. As leases expire the major practice administrators either consolidate and relocate practices into large medical campuses, or negotiate leases with retail strip centers that have empty space and are willing to sign a long term lease at way below market rent to attract an “anchor”.
I no longer invest directly in medical real estate, I invest in medical office REITs.
Hi Don,
Are you saying that smaller medical offices are gone due to these medical groups being absorbed by larger practices?
I invest (dabble) in medical offices so would really like to hear and understand your thoughts on this.
As an example I have a tenant that is a dermatology group. The business was owned by a sole proprietor, but the doctor sold it to a PE firm. He know works the derm practice still and I assume he gets a cut of the action from the PE firm. He has a couple of locations. I can't imagine this type of medical would be consolidated.
Would love to hear your thoughts.
TIA!
Post: Medical Office Investment Group
#1 Innovative Strategies ContributorPosted - Lender
- The Woodlands, TX
- Posts 6,275
- Votes 9,912
I've owned a few medical office properties in the past. Minimum total price for a smaller, yet still "efficient" property would be in the $1,500,000 + range in the less expensive states. Financing of up to 50% at 2 or 3 % over "base rate" can be had. Any LTV over that would require hard money rates, which would make cash flow negative. So, if you are able to find a cash flowing property in a low cost area you would realistically need $750,000 plus emergency capital of your own money to do a deal that has any chance of success.
Most smaller medical office buildings were occupied by solo practitioners or small partnerships. In the last 5 years those are gone, ALL medical practices are now part of major group practices. As leases expire the major practice administrators either consolidate and relocate practices into large medical campuses, or negotiate leases with retail strip centers that have empty space and are willing to sign a long term lease at way below market rent to attract an “anchor”.
I no longer invest directly in medical real estate, I invest in medical office REITs.
Post: Texas market for multifamily investing
#1 Innovative Strategies ContributorPosted - Lender
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Quote from @Geeta Bihari:
Hello -
I am a real estate investor with multiple long term rentals (SFH) and some STR. I am looking for multifamily (either 3-4 units or commercial 5+ units). Exploring the Texas markets at the moment where I currently have no presence. Looking for tips on high cash flow and possibly appreciation markets. Tips?
Thank you!
Here’s the thing , Texas has NO income tax, so education and other services are financed thru property taxes. As a result, non homestead property pays about 3% of MARKET value annually in property tax. BUT, county appraisals are often grossly overstating real value. An example is a retail center we owned that we purchased for $1,200,000 and put $200,000 into improvements. We could probably sell it for $1,600,000. When the new tax appraisal came out, it was “valued” at $2,300,000. Although we were able to get the value reduced to $1,850,000, our property taxes were $54,000 per year. Unfortunately the previous landlord had signed tenant leases that obligated the landlord to pay property taxes.
Similarly, property insurance is sky high due to hurricanes and storms. As a result the “usual” quick metrics doesn’t work in Texas. There are many cases where a county, especially smaller counties, have value property very low. When the property sells to an “outsider”, revaluation is brutal, doubling, tripling, or even quadrupling the tax valuation.
Post: The Downfall of BiggerPockets Forums?
#1 Innovative Strategies ContributorPosted - Lender
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Quote from @Chris Seveney:
Quote from @Henry Clark:
All posters on this thread. The newest Podcast byline is 469 with @Wale Lawal
How many podcasts are there as of today? Why haven't any more of the active posters been on a podcast? I don't monetize so no value to me. I would value your podcasts and would actually watch versus other REI non BP experts.
BP- please put some of the above posters on a new podcast and let me know so I can watch. Thanks.
BP- I would love to watch a podcast of a couple of the active posters on the same podcast round robin, with subjects such as: risk management, risk adjusted return, if I had Zero dollars, if I had $50,000. Best STR market in America, cashflow versus appreciation, Stock market versus REI, secret sauce, worst or missed deals, scaling, deal flow examples, etc etc. Let me know when I can watch them.
REI is great. Why? No 8 to 7. Enjoying lunch with the guys.
i have posted a few times here on BP and have applied to the podcast on multiple occasions and just stopped because I never hear back. I typically see people with zero experience or get rich quick stories and I am guessing that is what they are looking for as it sells, not people who have been in real estate for 25+ years and have gone from the traditional W2 to building $50M+ companies....
Post: Does anyone invest in value add office space? or is it really dead?
#1 Innovative Strategies ContributorPosted - Lender
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Quote from @Gregory Schwartz:
@Don Konipol Sounds like that is a very well thought-out and long way of saying, "office in the classic sense is dead", haha.
You said 'virtually worthless'. Would you consider $50/sqft virtually worthless, or do I need to reset my frame for how cheap we should be buying this?
Post: Does anyone invest in value add office space? or is it really dead?
#1 Innovative Strategies ContributorPosted - Lender
- The Woodlands, TX
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Quote from @Gregory Schwartz:
I’m eyeballing a property in a B to C-area of town, built in the ’80s, and it looks like I could get it for under $50/sqft. It’s about half full (I’m choosing to be optimistic).
I know office is generally considered “dead” right now, but I can’t help but feel that there might still be an opportunity. Anyone else out there taking a second look at office properties in Texas? I’d love to hear if you’re seeing potential where others see risk, or if I’m just being dangerously hopeful.
What are CAP rates in secondary Texas markets these days?
Prices for office building nationally are lower by an average of 45%.
Older buildings with obsolescence of layout, electrical systems, locations etc are valued 70% + lower than 5 years ago. Some are virtually worthless.
IMO this differs from previous large down times in that this appears to be a structural change in both the demand for office space in general and the obsolescence of old buildings. We own a building in Memphis we are converting to event space / flex space due to office rents having dropped 50% + in the last 4 years.
Office Properties Investments (OPI) a publicly traded REIT was trading an about $30 per share 4 years ago. However, because of 60% leverage (LTV) the equity for shareholder is essentially wiped out as its portfolio of office properties value dropped almost 50%. Its shares recently traded at 18 cents.
And recently some inexperienced investor posting on BP told me that real estate prices had never fallen even 20% and I just didn’t know what I was talking about. LOL.
Post: Investor/Wholesaler Transitioning to Development - Seeking Marketing Advice
#1 Innovative Strategies ContributorPosted - Lender
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Get a job with a developer or commercial real estate broker team that specializes in development land. This will enable you to gain knowledge, experience and contacts in the most efficient and effective way possible.
Post: High Risks with Wholesalers: What am I missing?
#1 Innovative Strategies ContributorPosted - Lender
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I just don’t see the big deal?
whether it’s buying an assignment from a wholesaler, bidding on a property at auction with no opportunity to see, let alone inspect the interior, purchasing real estate notes in default, etc. there’s greater potential profit to account for the greater risk. The OP wants the greater profit; he just doesn’t want the greater risk. LOL Don’t we ALL! Personal experience and knowledge, market “feel”, networking relationships, sufficient $ reserves, can all work to mitigate, thou not eliminate the added risk.
As for the “aside” Realtor vs wholesaler” that appears hourly in various BP posts, that’s been beaten to death. The fact that people are sold the Brooklyn Bridge and buy it and “kinda” try wholesaling leads to the majority of wholesalers being inexperienced, unrealistic, unknowledgeable, undercapitalized, and downright dangerous. The long term successful wholesalers I know are actually VERY professional, have a LOT more money invested in their business than most REALTORS do, spend $10,000 or more monthly on marketing, and have far more knowledge of building structure, repairs, building condition, and investment than most Realtors.
Post: The Downfall of BiggerPockets Forums?
#1 Innovative Strategies ContributorPosted - Lender
- The Woodlands, TX
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Quote from @Stuart Udis:
Lenders, real estate agents, property managers, wholesalers, turnkey providers, attorney, accountants, contractors, insurance brokers and any other service provider who posts on these forums is selling. The services that are sold is the real issue. This is sadly due to the expectations of today’s novice real estate investor. When I purchased my first property (passively at the time) in 2012 the mindset and expectations were different. So many now get involved expecting to replace W2 income, live off cash flow, go from owning a duplex to a 50-unit apartment building or building a subdivision and rely on social media influencers who misrepresent their holdings and their ease of success and expect the same.
While these expectations are not realistic, being the real estate agent who advises the investor it makes sense to save up rather than buy the property lacking fundamentals because the lousy SFH in Cleveland, Detroit or Philadelphia (just examples) is all that investor can afford or the tax professional who pushes the investor to purchase the terribly performing STR for the sake of depreciation rather than advising the client on the long game and tax benefits of sustained well performing ownership, or the attorney who uses fear mongering tactics to sell expensive asset protection services to the investor who holds no assets and the list goes on. The commonality is the ability to sell a service where there is instant and tangible results regardless of whether they hold true value overtime. Now more than ever, being a true fiduciary to your client means you will lose business. Many of these service providers are out of the business just as quick as the investor who take their marching orders and this is a cycle that is on clear display in the forums.
I haven’t seen an investment opportunity presented on these forums where there wasn’t a lender praising the spread (and there are some terrible deals floated in these forums), a completely impractical entity structure floated to be directed by someone they should move forward, the insurance broker ready to sell additional umbrella coverage without understanding the posters business or informing them they should focus more on risk shifting to their vendors policies…you get the idea.
You don't see the investor who first posted the terrible deal come back to the forums and share they couldn't obtain funding, you don't see the investor who owns one SFH but spent 10K on a holding company, WY management LLC and a FL land trust come back and share the slip and fall still lead to a lawsuit and wasn't even covered by their GL policy because they operated grossly negligent, or the investor who had to redirect their W2 income to cover the monthly deficit on the property that was supposed to eliminate their tax burden.
Yes AI is an issue but the poor messaging and terrible advice is a bigger problem.
There are two possibilities (or both) when a Service Provider gives bad advice. Either the advisor is trying to make a sale the easiest and most profitable way, regardless of the benefit to the customer, or as much or more likely the “advisor” is NOT experienced or knowledgeable, or talented in the field they provide advise in.
As an example; while there are many knowledgeable and experienced mortgage specialists, a great many, maybe even a majority, are SALESMAN selling “the next hot thing”. When the mortgage market cools down they’re selling oil and gas partnerships; then on to time shares, ACH loans, and auto repair franchises, with a pit stop for a try at multi level marketing.
Post: Advice on building equity or cash flow
#1 Innovative Strategies ContributorPosted - Lender
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Quote from @Jessica Yuan:
Hello everyone,
I'm looking to buy my first rental property and when I was reading Dave Mayer's Start with Strategy book, he mentioned a very interesting point:
"one approach that I personally subscribe to is to focus on equity growth early in your career and then shift the balance of your portfolio towards cash flow later. The idea is not to completely ignore cash flow, but rather to seek deals for their potential for equity gains, even if that means a modest cash-on-cash return.
Due to the combined forces of value-add, market appreciation, amortization, and leverage, seeking deals that build equity can generate large amounts of capital with which you can reinvest. If you spend the early days amassing equity, getting cash flow later in your career is relatively easy, you can do it through rebalancing and deleveraging."
Is this the strategy that you guys are using? Any advice on focusing on equity or focusing on cash flow for my first rental property? This will really help with what deals I should look into. I'm currently considering long-distance investing since California is not affordable for me.
Thank you!
Further, I’m less concerned with historical CF per se; more interested in what my CF will be considering any changes in the property, either forced or occurring due to outside forces. While historical CF is important as a future predictor, as a NUMBER it can be manipulated too easily by an owner with an eye to sell. Deferred maintenance, inadequate capital reserves, self management, “off the books” payment to employees/maintenance staff, free rental months to skew gross rental income, recording expenses to a different property, and recording of phantom income and phantom tenants makes me very suspicious of any financials provided by the seller.
This is typically not a problem with class A property that the big private equity funds and larger REITs deal with. This is basically a problem in dealing with small to mid size properties that individual investors may purchase. Which is a big reason many stick to SFR investing where financial analysis is much simpler.
That being said, if the property you purchase doesn’t have strong cash flow, you’d best have a LARGE cash reserve. Investors go broker during market downturns because they don’t have “staying power”. They run out of cash just as the market is about to recover.