All Forum Posts by: Winston Parks

How did this turn out for you and partners @Jordan Moorhead??

@Vincent Dang my experience is that agents who do everything aren't specialized in anything. As @Brant Garner mentioned above, due diligence on a residential property is totally different than residential not to mention the various hurdles in CRE. If you want someone representing you for a $1M+ sale, do you want a friend who bought/sold a few houses or someone who negotiates $1M+ deals every day?

@Erik Nizenkoff you need to call a company and get a quote for a Phase 1 and limited Phase 2 (basically soil tests) to be done at the same time. I get Phase 1s done on all properties and ask my guys to do a limited if it ever had a gas station, service station, or laundry on site. 99.99% of the time they would go out and do a Phase 1 but recommend the Phase 2.

The fact that the Seller refuses to allow you to do your due diligence is a huge red flag. I'm not suggesting you give up, but why on earth would he not let you spend the $8K to do it!? Do you have to buy this property? Bottom line, is the deal worth taking this risk? 

Good luck and let us know the outcome.

@Bo Wang keep educating yourself and know the difference between net lease, triple net, and double net lease structures. Remember, the lease is the contract so all maintenance, CAM charges, go dark clauses, ability to sublet, etc must be explicitly stated in the lease to know 100% who is responsible for what. Also, I prefer to pay for taxes and insurance myself and bill back to the tenant for reimbursement as that guarantees it is paid and is really the only way to know it was paid on time. 

Also, know your tenant! You may have a franchisee of a national fast food chain, but he only has one locations so his corporate guarantee isn't worth too much, right? Compare that to a regional company with 50+ locations then decide which you think is riskier/what cap rate you want. 

Regarding property management, if the building is new and the tenant is solid then you will not have to worry much with a property management company. Especially if you have an absolute net lease. Make sure the HVAC maintenance in the lease requires the tenant to provide 3rd party maintenance reports to you upon request. Also, make sure the lease says it must have monthly or quarterly maintenance. Ensure you get the roof warranty transferred over and it doesn't become void for any reason.

Feel free to reach out to me if I can help in any way.

Good luck!

@Abbas H. how is it coming along? You got some blunt albeit true advise from the group. My recommendation is to either stop construction or have the GC complete the shell and leave it in shell form until you find tenants. Do NOT assume you can "built it and they will come". Carrying costs will kill you if you financed it, but it seems like you are doing all cash as no bank I know would have financed this with no leases in place. Good luck and good the group posted.

@William M. how is your search coming along? There was some solid advice given in previous responses, but I'd like to point out what I think it most important for you to start.

1. Know your budget. You will need between $250k to $400k to buy a property between $1M-$2M. You are not going to buy a commercial property with no money down unless you do something strange which will likely spook any Seller.

2. Know how to calulcate the cap rate which is how you evaluate commercial properties. ALWAYS get the lease to understand if there are landlord responsibilities. Higher the cap the higher the risk. Lower the cap the lower the risk. By risk Im talking about credit rating or footprint if they are not a publicly traded company. 

3. Know the difference between NNN and NN and how that will affect your cap rate. Some people only want NNN, but if you are buying a new build with a NN lease with the landlord responsible with structure and roof then should you pass? My anwer to you would be it depends on what your investment strategy is.

4. Find an experienced Commercial Broker or Investment Sales professional who can help guide you in the right direction. It costs you nothing to "employ" them to work for you and you get someone who has done it before. While not always the case, I would try to steer clear of Realtors who bounce between Residential and Commercial. That is just my opinion. Another opinion I have is only talk to them if you are serious about making the purchase. Otherwise, they will not pick up your call when you are serious.

5. Why North Carolina? If you buy a true NNN lease then you can live wherever you want with the tenant maintaining the building.

6. Keep doing your research and starting looking at deals. If you do not have $250k to invest in a single property now that is fine. You can keep saving and start learning how it works. 

Good luck and let me know if I can be a resource in anyway.

Cheers!

@Luke Johnson did you ever pull the trigger?

Hey BPers, I've been lurking around BP for over a year now and reading and meeting folks and now ready to make a move. I've identified three markets of interest and intend to focus on multifamily. Not so sure my goals are "exponential" to most but they are to me. Let's say I have $100k to invest and a goal of 50 units by 2020. What are some creative ways to stretch that $100k if each duplex was $50k each? My understanding is that banks will not loan on such a low cost property. So, as usual, cash is king, but like everyone here I'd like to stretch each nickel. Assuming all I buy are duplexes then I need 25 properties to hit my goal or 9 per year for the next three years. 25x$50k= $1.25MM Now if I can do a traditional 20% down payment then I'll have $250k of cash out of my pocket, which is more than what I'd like to invest. Right now it seems the BRRR method would be best, but it isn't without its limits. Seems I'd likely need to get commercial loans (higher rates) which is fine. And I'm not sure a bank would refi a home at $75k or so. Is there a way folks have scaled without bringing on outside partners? Thoughts???

Jason Henning Maybe showing an interest in helping him find his 1031 property will give him a reason to be more open to entertaining your deal. If you are trying to get him to Seller finance longer term then that omits his ability to do the 1031 exchange so I doubt he will go for it. Cheers!

@Ian McKeown thanks for the feedback. Assuming no drastic reductions in costs then I will not do the deal for obvious reasons. We are developing a Commercial project next door and this is excess land that isn't very attractive for other commercial tenants due to the layout. Thus, my thought of building apartments.... I feel like I am missing something as I struggle with the idea that middle TN is at an all time low for housing, but I cannot build for cheaper than buying....

@Luka Milicevic its in Springfield TN so Robertson County. I have already spoke with P&Z and they have given me all the guidelines, etc. It is already zoned properly and the 8.4 dwelling number came from them. I realize it sounds crazy, but outside of getting a civil engineer to develop site plans it is fairly cut and dry. I am using stock plans from Stockon Design (link below), but will likely have a draftsman make some minor changes. In TN & KY (only states Ive dug in to) a commercial property under 5,000 sqft does not require architectural plans/stamps UNLESS the city ordinance requires them. Springfield doesn't, but I am unsure due to the plans being two stories. You are correct on Davidson/Williamson Counties, they require far greater detail and costs to develop. Before I call and ask I'm collecting all the questions I have for them.

http://www.stocktondesign.com/plans.php?act=detail...

Cheers!