All Forum Posts by: Michael K Gallagher

@Mark Towey I don't "farm" areas personally, it doesn't really fit the niche I'm personally going after, but what I have heard from some major agents in my market lately is that farming is not near as productive as it used to.  I've heard/had good results with more targeted driving for dollars looking for distress, or to some other comments points here, look for other data points to isolate "needs" to sell rather than "wants".

@Von Wilson theres a lot here to unpack.

Are you saying that there is a parcel of land next to where your business is that is under construction and is impacting your business?

It also sounds like you own the land your business is on and are thinking about developing the land with a similar building to what is being built next to you?

Have you built this kind of building before?  your comment around "approvals will be easy to get" gives me pays if you've not done this type of project before, I understand your logic, and I don't know your local municipality but it always seems to me that no matter how easy we think a project or approval is going to be, something always comes up.

@Hayley Beckman Thanks for sharing!  are you an investor in the detroit market?

While I've never invested personally in Detroit, my usual word of caution to investors in these "lower cost" markets is that while cashflow is great on a % basis, make sure to look at the actual quantity of cashflow.  Many of these homes in the midwest can be old, and have deferred maintenance and the management of these assets (ie. handling Detroit winters) is often where the deal is made or missed. If a $200 a month cashflow is 20% return then that's still only $2,400 a year and that can get eaten up by capex and other issues pretty quick. I don't mean to suggest $200 a month in cashflow is a bad return its actually amazing, but the expectations should be clear and understood in my experience.  

However, to your point the underlying fundamentals of the market clearly are worthy of investigation.

@Darren Samson 

what kind of loan you can use is a question for a local lender.  I have seen loan products that will let you purchase a mixed use property to live in the residential unit, but that is a specific product and you should consult and expert to see the best option for you and your cash on hand.  

The biggest reason I would advocate for mixed use is for the reasons you mentioned, the leases are longer, but also the general "issues" around tenants on the residential side don't come into play as much or at all.  Also if the property is zoned such that commercial can be there, you've got more options for an eventual redevelopment in my mind.  looking longterm who knows what's going to happen in the market.

The largest thing to be cautious about is that with commercial tenants you as the owner often have to put up money in the form of a check or abated or free rent to help the tenant get open for business and build out the space.  You'll also likely have longer than tradition residential vacancies.  

however, if you could find a loan product that worked for you and your situation, its a fantastic idea in my mind, and worth taking a swing for.

@Henry Clark thanks for sharing this detail, really interesting to see the operations and "stabilizing" side of things. 

@Sigmund VanDamme I'm not familiar with them as others here seem to be, but I do a pretty good bit of searching for industrial and flex space all over the country specifically for a flooring and carpet distributor.  We've hunted down everything from 8K SF - I'm currently looking at 85K SF for them so they really run the range depending on market and facility we are working on, but at every single one of those space sizes, its been competitive.  they are a credit tenant and as such we can kinda throw that weight around to take first position in cases sometimes, but for the most part its an exceptionally competitive asset class for the end user, ie me the tenant rep, to find space and get into ahead of the competition.  

We often are trying to lease new space that isn't built yet as a way to secure a foothold in a market.

I say all that to say: if its an asset you are looking at building, as someone that looks for those assets a lot, there seems to be a strong demand for them. 

 With an interest rate like that I'd seriously consider finding a way to hang onto it and rent it long term even after moving.

My wife and I sold our first home in dublin OH in 2018.  We bought it in 2016, did nothing to it and made $40K, which we turned around and used to buy a duplex to house hack.  That was the right move for us at the time, but let me tell you, boy oh boy does it hurt every time I realize i sold a 3 bed 2.5bath home in dublin schools that I bought for under $200K...its the one that got away and honestly will haunt me forever...or until i go back and get it again...but seriously find a way to keep that thing fo the long term especially with that rate.  the mortgage in itself is an asset now.

Hey @Zachary Harrison I will 1 up as they say what @Jaycee Greene has said, and that they will get a higher price with seller financing...but perhaps you make both offers anyway?  the SBA can still work but the price point is likely going to pencil way under what seller financing would allow.

Sorry one additional item I hit post too soon...The reason I asked about TIA is because you generally want to get a contractors opinion of cost prior to lease during that negotiating phase so you know how much that TIA covers and what you'll be coming out of pocket for.  

If you are already under lease, candidly you are likely behind the 8 ball as they say, I am hoping you have at least some abated rent while you get the buildout done prior to opening and rent commencing?  

@Shyam Sridharan if I understand correctly this is essentially the interior buildout of a new construction retail space?

In my experience it is common and customary for the landlord or builder to provide TIA, tenant improvement allowance, to the tenant to assist if not cover the majority of the internal buildout.  Generally I'm seeing anywhere from $25 - $40/Sf in TIA in different markets around the country.  I'm not sure what your specific market is but especially on a new build their is some kind of TIA budgeted by the ownership.

wast that negotiated as part of your lease by your tenant rep?  Just remember you are spending time and money to improve a space that isn't yours and you're not able to take the improvements when you leave, ownership should have some skin in the game especially in a new build.