Can you flip CRE?
People always talk about flipping residential RE, so my question is can you flip CRE? Anyone seen this happen?
[{"id": "e2ia24e", "text": "Happens all the time.  More likely to be called repositioning the asset.", "replies": [], "depth": 1}, {"id": "e2idgi9", "text": "People try and I'm sure there are success stories. I've seen a lot of failures. Incompetent or criminal contractors. People thinking since they know how to flip a house, they can flip an apartment.\n\n", "replies": [{"id": "e2idvcx", "text": "What makes it more difficult than a house? ", "replies": [{"id": "e2ieio7", "text": "Actually, now that I think about it, my partner and I are doing a 'flip' of sorts. Bought a 33 unit, was run down, had fire damage. 25 of the 33 units were rented when we closed.\n\nWhat I've said to her recently - we could have hired a contractor and maybe had everything done in a couple of months. Instead, we hired a property manager who is bringing in various contractors.  Expect within 6 months we will have all units back online and rented. The property will be returned to an acceptable level for a C class. Then I'd like to do nicer updates to the exterior and common areas and as units turn, nicer updates to each. \n\nIt's a slow process and my partner is impatient. However, the alternative that I have seen- vacate the  property, then do a complete renovation, can be risky. I've seen more than one vacant property that was supposed to be rehabbed in 6 months, still vacant a few years later.\n\nMy guess - issues with finding good contractors, finding more costly problems without budget to resolve. Just guessing though.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "e2igibb", "text": "Absolutely. Get a few tenants in your back pocket before you buy an underleased asset, put them in for a decent term length, then sell for more than you bought it for.", "replies": [], "depth": 1}, {"id": "e2igj7f", "text": "Yes", "replies": [], "depth": 1}, {"id": "e2iitrr", "text": "yes ", "replies": [], "depth": 1}, {"id": "e2iny19", "text": "Nightingale Properties does this very well. \n\nThey\u2019ll locate Class B+/A- office buildings for sale in fantastic commercial areas, make capital improvements to the office spaces within the building and once they raise the rental rate and fill the office building with new tenants at the new rental rate  they\u2019ll normally make an exit. \n\nThis is just an observation from my city on the east coast, but I respect their model. ", "replies": [{"id": "e2io3j1", "text": "What makes a building class B, B+, A, etc..? ", "replies": [{"id": "e2ioao5", "text": "In general speaking, Class A is your top of the line office space in a desirable commercial area. \n\nClass B could still be in that desirable area, but the building will lack amenities like a stunning lobby, not the best janitorial services, outdated bathrooms, etc. \n\nB+/A- is just a term for a building that\u2019s definitely better than Class B space but not Class A space.  ", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "e2iro1f", "text": "Sort of. It's called repositioning. If you're looking for an opportunity it's probably called value add. It's not a 'buy and put $25,000 in physical improvements and sell again in 45 days'. It's more like buy something that has vacancy because it has been poorly managed, manage it better and get occupancy up, then sell it. Just keep in mind it takes quite a bit longer to do that than to find a buyer or tenant for a single family house. ", "replies": [], "depth": 1}, {"id": "e2iugmy", "text": "It\u2019s called \u201cvalue-add\u201d in CRE and it takes a much longer time ", "replies": [], "depth": 1}, {"id": "e2ivnx7", "text": "Yes I've flipped a commercial property in 2 months without changing a lick. ", "replies": [{"id": "e2jduzl", "text": "Do you mind sharing the details? ", "replies": [{"id": "e2jfssb", "text": "It was a bank with a 4.5 year lease term remaining, in a pretty weak area of Ohio. Resold it to a 1031 exchange buyer from California with the help of a CA broker.", "replies": [{"id": "e2k7nx3", "text": "Perhaps the 1031 made the buyer buy something that wasn't ideal so as not to incur taxes.", "replies": [{"id": "e2lab13", "text": "Definitely could be the case. But also I paid a nice price 10.5% cap rate, and resold it for a fair price, 7.5 cap rate. The buyer from CA was happy to own a bank paying 7.5%, instead of local deals at 4-5%    ", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]