All Forum Posts by: Jonathan Orr

Hi BP

I have done yellow letters and mailings in the past for off market houses. I have been trying to think of ideas of what to put in a yellow letter or a letters to mail out to land owners about selling land for development. Specifically land for development.  

In looking at templates it is hard to transfer a lot of what is in the mailers I have seen because it is mostly dedicated to mailing to homeowners. If anyone has ideas or templates, would love the help.  I would be mailing directly to land owners so any advice of how to approach the topic would be helpful without scaring owners.  Thanks

Hi BP

I have done yellow letters and mailings in the past for off market houses and commercial properties.  I have been trying to think of ideas of what to put in a yellow letter or a letter to mail out to land owners about selling land for development. Specifically commercial development properties.  

In looking at templates it is hard to transfer alot of what is in the mailers I have seen because it is mostly dedicated to mailing to homeowners.  If anyone has ideas or templates, would love the help.

Hey BP

I was talking with a fellow commercial RE developer and he was telling me about tying up properties (mostly land) with LOIs and not putting down deposits. 

It is understood that you can structure a LOI where you don't have to submit a deposit until a PSA is executed. However he was telling me that he even has done deals without having to put down any deposits, even after a PSA. Unfortunately didn't get the conversation beyond that.

I was wondering if anyone has done this before?  Any reasons why you could do this and how you would go about it?

Thanks

Hey BP

Looking for a local drafter and/or Architect for a SFR in the that works in Long Beach Area or has done work in Southern California. Any recommendations?

@Joseph M. I was in the hotel management business in the beginning of my career and now focus in the development of hotels.  One thing I can say is if it is in the budget...get a professional management company.  You will run into alot of headaches, especially with a older hotel/motel.  There are aspects like marketing and revenue projections that need to be handled by a seasoned revenue manager.  I my first hotel I was in was a 135 door hilton that was being self managed and the guy ran it into the ground and the hotel was sold due to bankruptcy (I was only a front desk agent at the time)  I then was promoted with a very large management company that came in and I learned the intricacies of what is needed to run a hotel just on the operations side, and learned a little about revenue management, sales and maintanence. Even with a smaller hotel you are either having to do everything yourself or hire out people and pay close to a amount that you would pay a mgt company, plus most managmeent companies can work off a percentage of revenue so even if it is a bad year you are in it together.  The one thing I think a management company can help with is your turn over of employees, they know what to look for when an employee quits or if you are seasonal when to staff heavy to help with the good times and when to lean out for the bad ones.

From looking at your recent financials from what you posted seems extremely low for a destination area.  How many keys is the motel?  Additionally I would be careful with a place like Tahoe.  I was looking at doing a deal in mammoth and turned it down partially because of the seasonality of places like that.  You are having to depend on things like snow and weather to make your break your year.  Also I imagine it is not a flag motel which means your marketing is reliant on public sites like priceline and trivago which require constant updating with pricing to reflect the time of year and having to manage a reservation system to go with those sites. Also that revpar needs help.  With ADR being that high and maybe getting a third of that in revpar means alot of overhead is being spent on things like employees, maintenance, marketing, etc... I think a management company could help bring that revpar up.

Let me know if you have any other questions and I can help to the best of my abilities.

Thank you @Joel Owens 

I have used them in finding tenants for some projects in northern california a few years ago.  I wasn't aware they focused on the land or property side of retail, I thought they were more tenant rep, but I will reach out to them who are local to me.

@Scott Ellis  I believe you are overthinking the equity during the pre-dev and construction phase.  You are correct that you can't show a positive return to the equity partner during either of those phases, but that is laid out in your agreement with the equity partner that income and profits won't come until Certificate of completion and when the property can start receiving income.

From a underwriting standpoint you can show the negative IRR during the construction phase but I typically don't show that for the reason that my investors know that the project is a longer term process and I show what they can make when the property is up and running. (focus on the good) Instead I show the timeline of costs related the the pre-development and then will show the projected ROI upon completion, keep in mind I also take into account a stabilization period of lease ups so the ROI and/or IRR will increase year over year and after a investor sees that we can discuss a waterfall return program or deffering the returns until we hit certain milestones with profits. I would not be afraid of getting an investor in early if you are confident in the project. If you don't need the money and you bring them in during construction after alot of the soft costs are paid then you have more control because you took the "risk" and have more power to dictate how the returns can work. I typically structure my deals that the initial money is your "general partnership fund" which is first money in but it is also the first money out and I reward investors for getting in early by high prefs or larger equity portions. If it is after the entitlement or pre-development risk is done then I use them as limited partner in which they are passive with a set return and set equity stake. One is not necessarily better than the other, they are just different.

Like @Joel Owens mentioned the equity upside is the attractive part of your project so the wait should not be the issue if you feel it will be successful after the wait of construction and pre-development.

@J Scott is also correct that the investor should be looking at the project as a whole and not just on 1 year of no returns because of construction.  You can show the investor the yearly return during which the project is receiving income as well as a whole to show what their total investment will bring in upon sale or after a 5 year hold.

You are correct that no one get's paid until the project is done.  If investors ask me why they can't get returns during construction I would tell them that they are not debt and they wanted immediate returns they can be a debt lender and you treat them like a traditional loan.

Hey BP

Looking for commercial brokers/agents who specialize in land (specifically retail zoned) parcels or distressed retail properties in Southern California to track down potential retail development opportunities.  If you know of someone or are in the field, please PM me.

Thanks!

-Jonathan

Hi BP Community

I recently started doing some consulting work for a few new investors and thought I would ask you what people would like to see from a consultant/mentor.

With the array of directions Real Estate Investors can go from buy and hold to redevelopment and flipping.  What would you like to see from a consultant or mentor for your drive in Real Estate?  Or, if you have had a consultant before, what did you like that they did, or what did you not like and feel that they were missing in helping you grow you business?

In talking with other investors and people wanting to get started in Real Estate, I see that there are many different ways to gain knowledge and learn from workshops to books and podcasts (I am always finding myself learning new things from others as well, you can never get too much knowledge).  With that, I feel that there is a desire to have a hands on learning approach or help through specific projects with newer investors.  I want to start doing more consulting and helping other investors for different facets of Real Estate and would love your help in what you would like to see from a consultant.

Would love to know your thoughts and tips.  Thank you!

Love the post @Meghan McCallum.  So true about the path to success in this industry and how there are so many different ways to success because of the many different focuses in the Real Estate Industry.  Put it into a slightly different perspective for me which is awesome!