All Forum Posts by: Jeremy Cyrier

There are two steps that will get you to comfort level analyzing commercial deals. First take the CCIM 101 Financial Analysis for Commercial Real Estate Course. Second, talk to a couple of lenders and ask them for their complete income and expense underwriting standards.

Put the two together in any excel, argus, planease, or softwarep rogam and you'll undersand what information's going in, why, and what's coming out, as well as what it means for you.

You might want to consider investing with a partner since you are looking for a passive investment opportunity. There's a steep learning curve in commercial real estate investing and I wouldn't want you spend $400k on your education. You can get it for much less some other way.

NNN lease investments are great if you are looking for easy management and a long term commitment from a tenant. However, they are frought with risk because many are special use properties (ever see a chinese food restaurant in a former KFC?) and can be difficult to reposition in the market if the tenant fails or bails on you.

The reason these hit the market is because developers build them for a living. They build them at an 8.5-11 cap and sell them for a 6.5-8 cap, which is how they make a living.

Another thing to keep in mind is that the property may lose value over the life of the initial lease term because the cash flow becomes more risky the nearer to the end of the lease you are. Just go check out DG deals with 10 years of term vs 5 and see how they are valued.

Tim-

The number one question to ask this doctor is "what financial benefits do you want from your investment property?"

Challenge him to be very specific and don't let him off easy when he says "I just want a deal that makes sense and money." If you let him off there, you won't get anywhere.

Next go into asset types and typical returns to expect. See how his risk and reward tolerances match up to the specific benefits he's described.

Then you can start to map a plan to get him to where he wants to go and get to work on it.

One more tip, consider taking a small retainer from him to get going. You'll find out pretty quickly how serious he is.

James-

Congratulations for moving into commercial real estate investing. You don't have a negotiating problem, rather a financial targeting problem.

Investors will look at a deal from two main perspectives: cash flow and equity appreciation. One typically takes importance over the other. Which one is right for you? I ask because the two deals you describe are different from one another.

If I may make a suggestion, step back, slow down and decide what you want the property to do for you. Once you've clearly identified the benefits you want, you can move into your negotiation strategy. Clearly you know how to negotiate if you've made it this far.

Jesse-

Before you dive in, what kind of area is this property in? If the area is full of sex, drugs and rock and roll, walk away. No amount of owner financing will make it worth your while because you want to own good real estate, right?

I'm up in Boston and am suspect of an owner who's been unsuccessful in selling this apartment property on a 10 cap in this market and who's willing to carry $200k. It sounds tenuous to me.

If you're comfortable with the location and market, then Joel is correct above that the deal may not be financable without a down payment on your part. Call a few lenders to verify before you go any further. They will probably tell you that your NOI calculation is a little optimistic.

If they say no and you still want the deal, consider a master lease option to get control of the property with a plan to increase value so you can take out the owner of the deal later.

The CCIM Institute has awesome courses that take you through the gamut of understanding the language of commercial real estate, financial analysis, market analysis, and advanced investment decision making.