All Forum Posts by: Jeff Kehl

@Eric Thornton It's worth what you or someone else will pay for it :) Before we can answer much further it would be helpful to know what type of commercial you're talking about as @Henri Meli said "Multi family? Office building? Retail? Mixed use? Storage? ... etc"

You can't give away some types of commercial real estate these days while other types (apartments) seem to sell for unbelievable prices. It all depends on supply and demand both for the investment type and the underlying use of the property.

In general though it's a fairly simple financial exercise. 

Project the financial returns of the property minus outlays over the intended hold period. Look at potential prices versus the returns projected and compare them to other potential investments with a similar risk profile.

@Derrick Gordon I'm not aware of a service in Georgia that aggregates pending foreclosures. But they are public record and you can find them either in the local legal newspaper or online at Georgiapublic.notice.com.

You don't really have much time once the notice is published, about 30 days as they are auctioned the first Tuesday of the month and advertised the 4 weeks proceeding that.

You could just pay a Virtual assistant to compile the list for you. I just do it myself because there aren't many in the rural counties I look at.

Also, in the last two years auction.com and hudson and marshall have moved into the courthouse auction market in a big way so you can often just find the properties on their websites.

@Lenee Thomas I can point you to some lenders but as stated above, it all depends on the situation so telling us more about the borrower and property involved will help.

@Mark Costa sure you can, it's just slower and harder. I've built a portfolio of over 200 units without using partners or investors. But I probably could have done much more if I was able to get over fear of risking other people's money.

I'm looking to sell off some of my properties in Rome, GA to get into bigger properties. Rome is a smaller town just outside the suburbs of Atlanta. It is a hub of the NW Georgia area for medical (2 hospitals and 400+ doctors) and education (4 colleges/universities). It has a historic downtown, rivers and mountains and is around an hour to downtown Atlanta.

The properties I'm selling range from single family houses to duplexes, 4-plexes and on up to 22 unit apartments. I'll be selling for around the 1% rule rent to value with the larger properties being even better. The properties have pretty much all been rehabbed in the last 5 years and are currently tenant occupied.

Rent growth has been very strong here recently and many of the properties are under current market rents.

If you're interested in taking a look at a spreadsheet of properties with current rents and sale price, send me a direct message with an email I can send it to.

@Anthony Pace One thing that's different in commercial vs. residential is that often you don't rehab commercial before you have a tenant. Why? because you may spend a bunch of money on a rehab that's not functionally useful to potential tenants if their business requires certain buildout/finishes. In my commercial properties, which are smaller with mostly mom& pop type businesses, we generally negotiate tenant improvements as part of signing a lease with a new tenant. 

Quite often they want to do it themselves because how the business looks can really affect its success.

Also, make sure to check what the vacancy rate is of similar properties. Buying vacant commercial space without a specific plan is kind of risky because you possibly have to hold it vacant for long periods of time and carry the expenses. 

Certain types of commercial space can go dark and not find another use for 10 years if ever.

@James Mann What's the highest and best use for the property? How many VPD pass by there? What other new developments have gone up in a 30 mile radius? How many of each fast food, hotel, insurance agency, etc are nearby? Are you involved in the chamber of commerce? What types of businesses are opening in the area? What types of business are opening in similar towns in the region? What are the 10 fastest growing chain businesses in the area?

@Stian Birkeland see my other post for a description of my experience using this technique. But a couple things I wanted to add to you directly. If you already have investors why worry about this approach? Essentially what this technique does is keep the seller as one of your investors. Granted they're a 2nd position debt investor. But they're still an investor in your deal. In the right short-term situation where you can buy them out quickly by refiing the property as you suggest I think it works well but those deals are very hard to find for people with deep experience and connections in that local market so for someone with no experience and no local knowledge it's going to be nearly impossible. Unless you find a good local partner or the market gets bad again.

@Brandon Sturgill this kind of thing can definitely be done with commercial financing. I've bought 5 properties that way. You have to find the right lender. The ones I've done it with already knew and trusted me from other deals. Plus you need the right seller that doesn't mind holding a note for awhile. Finally, you need the right property because a) most won't cash flow very well with high leverage and b) it has to be something you see that others don't or you'll lose the deal to someone who offers the full down payment. One last consideration. Of the five I've done, I have paid off three, one matures next year And I'm actively trying to pay off the last one. Why? Because they're a pain in the ***. You're paying a lender who has never lent money before and they can be high maintenance. Also, when you pay them off, you have to be very careful they release the lien properly or you have a cloud in your title. If they die, disappear or go to prison it can make it hard to sell or refi the property. To summarize, I think it's a strategy that can work in some circumstances but it's mostly better to avoid it.

@Joshua Hill @Hadar Orkibi @Theo Hicks

I'm a bit of a math geek, love formulas, calculations and building spreadsheets.

Here's what fascinates me about these 'rules of thumb'. 

Do you know that the 1% rule combined with the 50% rule is equal to a 6 cap? So for instance, a $100k property rents for 1% or $1000/month. 50% is expenses so you actually clear $500/month after expense.

$500*12 = $6000. $6000/$100,000 = .06 or a 6 cap! 

Isn't that cool?

Likewise a 2% rule is a 12 cap and a 1.5% is a 9 cap.

None of this really matters for an individual property because there are so many other variables involved such as financing cost/interest rate, capex needed, ACTUAL expenses, rent and price appreciation rate, ACTUAL expenses and others.

But I just find some of these basic truisms to be interesting.