All Forum Posts by: Phil Christian

Make it a Development Fee on the closing statement and yes pay the person if they bring you a deal and you get it over the goal line... 

If you are in Cerritos and referring to SoCal multi family brokers there is no such thing as "buyers brokers".  Those are brokers who either don't have listings, new to the business or just telling you this in hopes that they can write a few offers on your behalf.  What I'm getting at is the top multi family brokers in SoCal are all listing teams and more often than not they do not represent buyers unless they have a relationship. 

Are you comfortable underwriting deals on your own?  Do you know the market you want to buy in?  Are you going to get cold feet during the due diligence process?  Would you feel more comfortable with someone riding shotgun with you?  There is a lot of benefit with building a relationship with a broker that you are comfortable with representing you.  This said, just know, that they are not going to be the top brokers and there is a slim chance that they are relatively knew the the business.  This will not always be a bad thing.... they could be hungry and excel at representing your needs. 

So, being new, by default you are going to have to play the field with all brokers until you buy a deal or two and your relationships and processes starts to mature. 

If you want more insight on SoCal brokers, pm me. 

Couple things to consider... 

As a business owner you are in the business of a business.... whether it's selling, manufacturing, producing, servicing, non-profiting, analysising... whatever sector you are in you are probably not in the business of owning real estate. 

First: So consider your internal hurdle rate. If you have 20% profit margins on every dollar you invest into your business is that $1 going to a better use investing in your business or receiving a smaller return in real estate. For simplicity sake, use the down payment required to buy a building as your initial investment which assumes you are paying rent to a landlord elsewhere. 

Second: Which follows after the first... are you using company money or personal money.... meaning are you buying personally (perhaps with a single purpose LLC) in your name and your business is renting back space? This assumes that you are not dipping into company money because your company is healthy and your personal balance sheet is healthy and you need a tax shelter or want to diversify your personal assets.

Third: Do you have monuments with your company in your current space that you need to protect against the unknown market conditions? Monuments = heavy machinery that cannot be moved easily. e.g., Raytheons Tomahawk missiles facility or a restaurant in a particular location that fits your needs. In essence, can you replicate your current setup within a years time with tolerable business interruption or setup capital expense. 

Obviously, that's not all of it... but If you can answer those questions then you are in a position to make an informed decision. 

Become friends with the local brokerage community with local market knowledge in the area you want to buy specializing in the product you want to buy. 

You're not giving enough information to answer the question.  Post: 

1. The NNN rent schedule on the remaining years of the term (first 3 years)

2. Asking price

3. Option terms and the nnn rent schedule it those terms. 

Then maybe we can answer.  At the end of the day you are probably going to want to value the asset on the first option term rent. 

Just remember that if you form a TIC structure your 1031 investor will have signing authority relative to the loan and title. If you do not trust them, or they are green, as real estate operators it can get sticky getting on the same page making decisions.

 Perfect... good luck on this deal!

Not necessarily but yes you could structure all three (3) to have the same effective rate.  It's NOT necessary but it is a good starting point in your RFP and it will make perfect sense to the tenant.  

Candidly, you're shooting in the dark here and now trying to negotiate a deal without brokerage and subsequently local market knowledge support. The mental backflips you are going through right now is the reason why commercial real estate brokers earn their fee. 

I don't want to sound rude but you keep posting questions related to this deal and it sounds like you are in way over your ski's.... You are only giving little nuggets of information about the deal structure and candidly it doesn't sound like you are focused on the actual deal structure itself. 

From what I have gathered... you are trying to by a building that is currently under construction.  The scheduled construction completion date is April 2019.  Are you buying a vacant building or a building with a tenant in tow?  If with a tenant in tow, when is the tenants lease start date and what is the trigger for that particular lease commencement.  Generally speaking, the lease commencement is the Certificate of Occupancy (but it could be structured differently). 

If no tenant in tow, you are buying a building under construction (partially built). 

Is there a CUP in place to allow a fitness center? Is a fitness center permitted by the zoning? 

What exactly are you buying? Do you have a set of the construction docs? It sounds like you are expecting the Seller to sell the building partially built and then they will stay on as the developer? What incentive do they have to complete the project by April 2019 if you have already closed on the project? Who is the General Contractor? The GC's contract most likely states that their scope is finished once a certificate of occupancy is issued. 

The Seller doesn't really control the Certificate of Occupancy, the city does.  The certificate of occupancy is issued by the City and states that all conditions of occupancy have been met (building, permitting, fire, etc).  

The way I'm reading your question, to me, you are putting the cart before the horse here and are concerned if the Seller is going to mail/email you a certificate of occupancy... which the city would have on file anyways.  More importantly who is responsible to do all the work and under what structure all the way up to the final permits being completed?

An operational checklist is sort of difficult to make because it is specific to YOUR business plan on that specific deal.. that said, here's a good start for a DD through property set up checklist.