All Forum Posts by: Greg V.

Expenses are much higher and I plan for at least a year of vacancy. Brokers I work with charge up to $4per sq ft to get tenants in ($2 for the tenants broker and $2 for my broker). Monthly management is similar to residential ranging from 5% to 10% of gross rents. Negotiations with tenants have more dimensions including build out costs, free rent, length (I look for at least a 5 year lease with established companies). We split a build out on a small 2k sq ft retail space. Total build out cost was $22k. It can get pricey but depending on the market and the tenant, that can be tenant paid.

We're actually moving into that sort of model. I just listened to a recent Biggerpockets podcast about renting smaller spaces and I know that's what Joshua Dorkin uses. I've seen the demand for the medium sized units decrease which in our market is around 3k to 10k sq ft. The demand for the 500 to 2000 sq ft is large. These are new small business owners that aren't quit confident enough or have enough capital or funding to start bigger. Probably analogous to the trade up buyers in the residential space, the trade up commercial tenants aren't there because of funding and low growth prospects of the last couple years.

Two things that aren't listed that are negotiable depending on the local market are the build out costs and free rent. The build out costs are the costs to finish the space. Most likely they will provide you with walls and concrete floors and you will have to finish the rest (bathrooms, interior unit walls, flooring, lighting, etc). However this is negotiable. Ask about it. It doesn't hurt. The last tenant we signed, I paid for 50% of the build out because the tenant signed a 10 year lesser and was a national brand. Also ask if the landlord would give a couple months free rent. I will give anywhere from 0-6 months free rent also depending on the tenant, and other terms of the lease. Hope this helps.

I should also say that you can get commercial loans under your business but they will be personal recourse until you get to the size of Joel's deals. Someday we'll be there:). The way we started was with a small downtown two unit building on a Main Street in the suburbs of a big metro. It wasn't big money. I've moved around a bit too and may have some ideas if you have a location in mind. I would recommend an area that you will eventually be settling down in or at least wanting to visit once or twice a year at the least.

When you say commercial, what type of commercial are you thinking about? Multi-family apartment buildings or office/retail/warehouse? Joel Owens is spot on. Commercial requires more money in the bank. We know the retail/office side of the business. Everything is more expensive from broker lease fees, tenant build outs and maintenance along with much longer times to find tenants. However, there are segments and markets where you can get in with middle class bank accounts. We buy half empty to fully empty office/retail spaces. Depending on the size and number of units, it could take 2 years to stabilize the property. It may take 3 years to make your money back but with a 10 year lease, it's much less painful then apartments, IMO. Plus the forced appreciation is nice because you can cash out refi in 3 years and purchase another one. Email me if you want to talk more.

First I would learn what type of commercial property fits your personality and bank account. From my own experience, I've had a progression that changed as my personal reserves and risk tolerance ability changed. The beauty of all commercial properties is the ability to force appreciation. Buy something partially vacant or below market leases, fill it or sign new leases and the value goes up. You can start with small apartment complexes, quads, etc. If you buy right you should be cash flowing from day one. You will still need to have a reserve for large capital expenditures like roof, boiler, etc depending on the size of the building. However you will also have steady rents. Next step up would be small retail, office. Vacancies are longer, broker fees to fill spaces are higher, and tenant concessions can be large so higher reserves are needed. However once you get tenants and sign them to multi year leases, the headaches are much less than an apartment building, in my experience. Lastly, you go to the commercial space that Joel Owens specializes in which are big box stores with really long leases but low cap rates. That's more of a capital preservation strategy in the later years. I come out to your area about once a month. Maybe we can arrange a sit down and drive through the city looking at potentials.

We went into retail/office commercial after about 5 years in SFH rentals. I hated getting the complaints from SFH renters that they hate the paint color or the light fixture looks old, etc. By the way, this was after they signed the lease. I didn't comply with all the demands but it drained me. Luckily I bought a retail place kind of by chance and really loved the NN or NNN leases. Businesses tend to also be less emotional and more professional. They tend to understand that it takes more than an hour to fix the AC. In my experience just less demanding and more reliable. It just fit my personality better. Then after I realized forced appreciation, I switched for good.

This is one of my great annoyances in life. The vast majority if not all "financial planners" are really just mutual fund salesman. It really bothers me. Why are they not required to learn about real estate investing as part of their certification. Maybe they do and just brain flush it when they become a mouth piece for Wall Street. Sorry, I just had to vent...

I should also say that I don't understand the buy local, organic thing so I can't speak to how sustainable that trend is, what you can do with 3 acres, and where the prices are going. As for traditional farming, 3 acres is nothing just like everyone else said. Farm fields in our area start at 40 acres. Farmers look for more than 160 acre plots for irrigation pivots.

Paul Ewing is exactly right. Both sides of my family are dairy farmers that sell extra soybeans, and corn. At $3.70, farmers will be hard pressed to make money especially if purchasing new land at $5k-$10k per acre. The trouble won't come from over leveraging land like the 1970's but over leveraging on equipment that is much more likely to be financing or leased now versus in the past. Most farmers can hold out a year or two with reserves from the high prices of the last two years, however if prices stay at this level, farming will be very difficult in the near term. Everything goes in cycles, this time is not different and farming and farm land have been hot lately. Wait 2-5 years for farm land and you will be rewarded.