The short guide to investing in commercial real estate

#יםמהשבוי Barak Yaakovovitz #post4
So today I wanted to get more into the practice of the field - how do you locate? How do you analyze a deal? How to appoint a transaction? Of course there are many other variables, but I want to show that even a 24-year-old boy like me can do it
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Why invest in commercial real estate?
In short, long-term contracts generally have more responsibility for the tenant, such as triple net contracts, where the tenant pays 3 of the major expenses of the property, the value is determined according to the income from the property, that is, if the income increases, the value of the property increases, even with the help of more correct management, it is possible to increase the rents and increase the value of the property, dealing with businesses versus private individuals
First of all, what to invest in?
Each type of property in commercial real estate is a world in its own right, and I would recommend you to research or feel free to contact me (if it is offices, self storage, industrial, retail, multi-family, hospitality and hotels, etc.). Personally, I invest and find Retail, and Flex industrial, because the tenants stay longer, there is an option to sign an NNN contract with them, and the sector is booming.
How to locate?
First of all, a clear buying criterion must be defined, for example a 3000-7000SQ FT property to begin with, with several units with the possibility of increasing the operating income from the property because part of the property is not rented or rented below market price.
in Roques-
After that, contact commercial real estate brokers, and emphasize that you understand that you are building a long-term relationship and do not want to waste their time, and understand that both parties will be rewarded following a deal.
Transactional attorneys
For a loan over a million dollars, the borrower should write to a lawyer because he understands the meaning of the loan, they are a great source to understand active parties and assets in the market that may be sold.
Auctions
Courts
REO and departments in the bank that deal with properties owned by the bank
אתרים
Marcus and milichap, loopnet, crexi nai global
Contacting the owner directly-
Issuing lists from a supplier - such as Profster or datausa, according to a certain criterion (an option for property owners who have owned the property for several years or have equity in the property) and contacting them in the usual ways - cold calls, postcards and letters, texts, etc.
driving for $$ Personally, this is a method I like, drive around shopping centers and main roads and see properties in a great location that need some love and contact the owner
We received a deal, how do we analyze?
At the age of 22, I found myself analyzing a large number of properties every day.
One of the FLEX INDUSTRIAL properties in Charlotte caught my eye.
The property was offered for $1.9 million, approximately 43000 SQFT. The owner owned the property for many years and felt that the tenants were his friends, he did not properly manage the property, did not raise rents and maintenance was challenging.
I saw that the property was rented for about 4.5 dollars per sq ft from an inspection of rentals of similar spaces in the area (a report from Costar, LOOPNET and other sources) I understood that the property can be rented on average for 12 dollars per foot, and at least 9 dollars per foot.
After replacing most of the tenants and renewing existing contracts and increasing the income from the property, there is an offer on the property from last week, in the amount of 3.6 million dollars.
This was my first baptism of fire in commercial real estate.
Of course, the analysis is much more complex than what I will mention here-
But we will examine the price of the property according to Scour Pot, how much it brings in noi, what is the potential for improvement, calculation of calculations (what is the worst that can happen, what is optimistic and what is likely to happen) do the expenses look normal - have management expenses been included in the calculation and what percentage, is the calculation tax Will it cost us to take ownership of the property? What about the insurance? During the due diligence phase, we will also check the reliability of the expenses.
What is the multiplier that the property was sold for? Is the owner willing to do owner financing?
After examining the financial issue-
We will examine the location, demographics, income, the crime, the development of the location, you can improve the property as much as you want, location cannot be replaced..
Examining the physical condition of the property - infrastructure, landscaping, see what needs to be replaced, when is the roof from and what type? Who are the tenants? What is their rating? How long are the contracts, how long are they in the property and how long do they stay?
Is the property located near highways? How many vehicles pass by the property on average every day? What is the population density?
And the last step I will explain today is the financing
Of course, traditional financing through the banks
owner finance, but creative financing such as owner financing is also possible, for example I am negotiating a commercial property 4200 square feet of office and warehouse, and the owner confirmed his desire to finance a significant part of the property in installments with low interest.
credit During the negotiations it is possible to receive a refund from the owner for renovation and replacement of parts in the future of the property, for example a roof and the amount will be reduced from the amount paid to the owner
Recruitment of investors - the division of the property into GP and LP, the main developers offer to bring in silent partners in exchange for 7-9 profitable returns per year, and a certain distribution of profits (if it is a capital investor) in the form of an IRR of 11-18 percent for the investor, but the investor also participates in the risk
Debt raising - debt loan from an investor
subdivision of collateral
This is a whole world in itself and for those who have assets in the US, I recommend researching more in depth about a mortgage
There is enough meat in commercial real estate for everyone, and the deal can be divided into those who bring the deal and manage it, those who take the loan from the bank, and those who recruit the investors
During the due diligence period - signing a tenant for a new lease, and requesting a down payment as soon as we become the legal owner of the property, in exchange for a certain discount, for a period requesting payment of the entire lease period for one year in advance
master lease we can sublease the property, and at this time improve the property and after the sublease period, go to the bank and carry out a mortgage cycle, probably during such a process we will have a negative flow
Of course, strategies such as wholesaling also catch on (and some are offered a 3-6 commission from the deal, and you can ask to join the deal and thus learn more about the field)
In conclusion, in my opinion it's a matter of mindset and you can be very creative in this area
And in the picture with a huge entrepreneur who concentrates the field of commercial real estate in the US J Scott Sheel who always says that it takes one deal in commercial real estate to change an entire life

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