All Forum Posts by: Prithvi Sri

I see several Dollar stores (Dollar General, Family Dollar, Dollar Tree, etc) on the market at somewhat attractive (7%-8%) price points with around 10 years in lease remaining. My question is, is this normal or is there a trend? I looked at the stock prices of the companies and they aren't doing bad. What gives?

@Sam B. I too was concerned but the offer I'm making is at CAP rate 9%. If it goes through, I will get almost half of the property value by then. I'm using 1031 exchange to buy it with cash now and will refinance it after six months to a year later - basically the equity in the property is my capital gains from previous sale. I feel 9% CAP rate with a successful national brand deserves some risk taking in terms of timing.

I use three years total appreciation metric - that includes appreciation of the property at the rate of rent appreciation and accumulated principal payments. I prefer this to be 30% of my equity investment.  If I’m getting 10-15% on my equity in annual returns and an extra 30% after three years if I were to sell, that gives almost 50% total RoE over three years - not a bad investment. You can only get this metric with about 30% down and cap rate above 8% though. 

I am a real estate broker in CA and have been investing in residential RE for over two decades. Bought and sold a couple of dozen properties over the years using my own real estate license. Now I am planning to buy a commercial real estate (of approx value 2 million). It is a single tenant, absolute net, lease contract of a standalone building. The tenant is a retail establishment owned by a very large profitable listed company.  The tenant is at the property for 20 years, and three months ago signed an extension for 5 more years. In all likelihood, tenant may extend it beyond 5 years too. 

My question is, do I need a real estate agent? The commission seems to be over 60K so it is not exactly chump change. Since I found the property myself and have reviewed all the financial statements of the tenant store as well as the parent company to be satisfactory, what exactly would be the benefit that I get from the broker instead of my self representation? I did all the paperwork for my residential purchases in the past and kept the commission for myself. What are the risks that I will be exposed to, if I were to do the same for the commercial property too? If there are any risks, is there a way I can mitigate the risks (say by hiring a real estate attorney or an agent who will work for an hourly / flat fee? I want to be frugal and save money on commissions, but I also don't want to be stupid and expose myself to a risk that a broker/attorney can help save me from when I am risking 2M). 

Any commercial real estate investor who tried going solo and lived to tell the story? Any inputs are greatly appreciated.

Thank you,

Prithvi.