I inherited a commercial building. Im pretty lost here, I need some guidance.
Hey guys, so long story short, my mom died in a nursing home covered by mercy care. My sister and I were kinda dumbfounded because we never realized she owned any property, she never told us. We live in a growing city in Arizona.

The building is generating revenue, so far we have spent 100% of the revenue fixing up things like the roof, AC units, paint, plumbing etc.
We are trying to get all the major repairs done in 2018 for the best tax break. Both of us have about 100k in savings, and we don't want to touch it.

Right now we have a management company running it (of course) as we are still learning. There are other bigger things that need to be fixed like the parking lot, which will cost 60k. We've already spent maybe 100k on repairs. So far we've had many many people try to take advantage of us and our situation while we have been looking for guidance and help.

We have an executor (my mom's best friend) who is in charge of all our financial decisions when it comes to the building. All though we are adults now, we still talk to her about any descision, and she helps us with all our choices.

Some people tell us to sell it, others tell us to keep it. Right now we want to keep it as investment.

The building consists of 12 rooms, and All are occupied by various different buisnesses. My sister and I got sued for 60k by the banker who holds the note to our mortgage. Loooooong story short, we found out he was taking advantage, we learned that his demands came from a bullshit stipulation that he thought we wouldn't find.

After paying landscapers, cleaners, maintenance, management, and other things, we have around 5-8k left over monthly that we put into repairs.

So far owning this building has completely isolated us from the rest of the family for obvious reasons.

Anyways this was a big jumbling mess, but I hope you get some what of an idea on where we are at. 

I need to learn a few things, and I'm going to ask these questions as a complete and utter boob, but I have to start somewhere.

1. Like stocks, it's easy to get data on market trends, volatility and how things are moving. I can't find any good visual representation on the commercial real estate side of things. Where can I find these resources?


2. When it comes to finding estimates on fixing things like parking lot pavement, what do I have to take into account? I know depending on the season, prices fluctuate


3. Are we in over our heads? I already know the answer to that one. Probably.


4. Does the standard housing market correlate with commercial real estate? 


5. What happens to commercial property in a recession? Are there different kinds of recessions? If stocks crash, our building is still going to be occupied, and things will keep running. Where does the loss take place?


6. We have a little over a million dollars mortgage left, we can easily make the mortgage payments monthly. Should we worry about going bankrupt?  


7. My main question: What direction do we go from here? I don't trust any resources I find. Books, meetings, speakers, all seem to be a sales pitch to join something. Where do I look?

Okay thanks guys, I hope I don't sound like a *complete* idiot here.



[{"id": "e8316b9", "text": "Hey, I work at a commercial RE company named Voit. Why don't you give us a call? Brian would be happy to talk to you, he has worked 31 years in San Diego in CRE. He can answer any questions you may have, as well as assist if you decide what direction you want to take it. He said he doesn't know the Arizona market well, and is not familiar with tenants in the area, but would be happy to refer you to someone who is. \n\nFeel free to call him at Direct: 858-458-3372, or Cell: 858-922-3372. It's just so much information, and to properly answer your questions, it would be easier to just have a conversation, no strings attached. ", "replies": [{"id": "e834lcw", "text": "To be honest I'm skeptical because why would a guy who doesn't have anything in it for himself take the time to talk to a stranger out of the goodness of his heart to someone who doesn't know anyone like me?\n\nIm very easily taken advantage of, and it's already happened a few times to I will never allow it to happen again.\n\nIf thats not the case, thanks brotha I appreciate it! I'll give him a call after work tomorrow and see if he's actually willing to answer my questions!\n\nThanks.", "replies": [{"id": "e8375x9", "text": "My boss, Brian Mulvaney at Voit, has me researching/prospecting. \n\nThere IS something in it for him, just not immediate! He is just trying to find contacts, get his name well known in the industry, and figured someday, maybe in 5-10 years, if you ever plan to sell the building, you may remember him, and there is a higher chance that you will contact him first instead of someone else. Basically, that's just how you do business: Connections, forming client relationships, and networking. Having good relationships with more people means more business and partnerships. If someday, you bump into someone else in search of a good broker contact, you're more likely to think of him than someone else, especially if you remember how knowledgeable he is. That exposure is invaluable. It's good to know people. That also means if he ever finds a tenant who is in search of a small office in Arizona, he has one more person, you, who he can contact to see if you have space available that can be leased out.\nI am Avery Kucan, a personal assistant. \n\nHe does have an SIOR and CCIM membership, and you can google him. He is a well known broker in San Diego for this reason: He spends time networking and learning about more people.\n\nIf you choose not to, then that's fair enough. I have known him for years, and as his assistant, I am just searching for people who may need assistance.\n\nView his SIOR profile for his phone numbers. The office is closed Saturday, but you can call his Cell number. \n\nhttps://www.sior.com/viewprofile?PersonID=25174\n\nHere are some of his listings:\nhttps://www.loopnet.com/brokerdirectory/profile/brian-mulvaney/1l6d907\n\nhttps://www.corfac.com/main/members-details/1464\n\nhttps://www.linkedin.com/in/brian-a-mulvaney-sior-ccim-353140\n\n\nAnd of course, he is one of the lead mentors in a grass-roots organization Boys to Men: https://secure.qgiv.com/event/account/646915/\n", "replies": [{"id": "e838l1f", "text": "This is not a good strategy for prospecting. ", "replies": [{"id": "e839qht", "text": "He does OK for himself, and is quite successful. This, on Reddit, is definitely NOT. You're right. But when I came across this post, I asked him about it, and he said \"Yeah, have him call me\". \nUsually, I look at delinquent payments on Trepp, tenants who are trying to move into a bigger space, or even the occasional new business, just to call, learn about what they do, and get to know people within the business. \nIf you do want any questions answered, he IS one of the largest brokers in San Diego, after all. \n\nI mostly do the research on Lexis Nexis, Costar, Trepp, or LandVision. ", "replies": [{"id": "e83bgti", "text": "As a former fellow research weasel, I salute you. ", "replies": [{"id": "e83cexb", "text": "Haha, well at $15 an hour, I really can't complain. I have a wide skillset. Oh, and I get to show up and leave as much as I want, I have super flexible hours. The job is... well not the best, but I like the people I work with, and it's DEFINITELY worth the freedom. And I love the way Brian does business and interacts with his clients and coworkers. ", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}, {"id": "e83a50u", "text": "Eh, I am not a real estate guy. I am an engineer who happens to be good at Data manipulation, so I was hired to do mostly that. \n\nI just do what I am asked. ", "replies": [{"id": "e83aygc", "text": "Fair enough. I figured it was something like that. Good luck. ", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "e839z1j", "text": "Do you happen to have a full spreadsheet with financials? Or better, an Argus model file? We don't need it, but it's a good idea for you to have for yourself. ", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "e831gvj", "text": "1. Find local commercial brokers in your area. they have data. Depending on your market the national firms can have office data. CBRE, Cushman wakefield, NGKF, etc. Dont use residential brokers. The commercial brokers may actually be able to teach you a thing or two about how the run the business side of the real estate. We trust our brokers for business guidance all the time. We dont always follow it, but we listen.\n2. Always get 3 quotes for any job if you are unsure of what it should cost. Use yellow pages to find local contractors. Determine why their quotes are priced how the are. Dont hire the contractor simply because its the lowest quote. Use the one you are most comfortable working with that communicates best with you.\n3. Yes. But everyone starts somewhere. Trial by fire will tell you if you have what it takes\n4. focus on the commercial market and ignore the residential market. contractors you work with may do both, but not the brokers. you want commercial brokers.\n5. in a recession you may lose tenants, rents will have be lowered to attract new tenants, you may not be able to rent the space. so long as you can cover your mortgage you wont lose the building. you will just make less money. so long as you dont have to refinance during that period you'll be fine. you want to refinance with a full building at highest rents.\n6. you will only lose the building if you cannot pay the mortgage. (or taxes, but taxes are a given and a wonderful tool that helps our society function properly) make sure hte building is held in an LLC. have a lawyer set one up. It will shield you from any personal liability. THE LLC IS NECESSARY!!!\n7. you will build trust with contractors, vendors, and service providers as you work with them. at this point you can either sell and reinvest in an index fund, etc. Or you can take this as a challenge and try to live and learn. commercial real estate isnt for the faint of heart. it isnt passive income. it isnt low risk. I dont know why people say it is. So long as you hold the asset in an LLC the worst that happens is you lose the building and your personal finances are untouched. Best that happens is you have extra income and an increase to your net worth.\n\nEverything and I mean EVERYTHING is negotiable. every service contract, every broker commission, everything.\n\nfind a course on real estate finance so you understand the basics of cash flows and values. These classes may seem like marketing ploys for the teachers. They probably are. But the basics of real estate finance you learn will be incredibly helpful in understanding how to create value, especially if you have debt on the property. And you never know, the teacher may actually have a worthwhile proposition for their own business.\n\nMy credentials: I am heir apparent at our family real estate business with ownership of about 1,000,000 square feet of property ranging from shopping centers, class A office, medical, apartment, etc. I am being trained to take over running our firm. We focus on running investment vehicles for outside investors, development, and property management.", "replies": [{"id": "e834snr", "text": "Wow thank you so much man, this is the most cut and dry, easy to understand explanation I've gotten to these questions all year. I'm at work, I'm going to come back later and go over it again so I can have a proper conversation when I'm not busy.\n\nSeriously, thanks for taking the time to write all that, it's the simple, non technical questions that are hard to find a good answer to.", "replies": [], "depth": 2}], "depth": 1}, {"id": "e84clo6", "text": "If you are paying a high rate (anything over 6% for what seems to be an office building) I suggest you refinance. This will help you two-fold:\n\n1. You have the option to pull out cash which will give you an injection to be able to do all the repairs you mentioned at a quicker rate and potentially be able to charge a higher rent once everything is fixed\n\n2. The lower interest rate will save you on your payments. There is also an option to do interest only payments where you don\u2019t pay the mortgage until maturity (could be 5,10,15 years later) which will save you money in the near term and give you time to learn the business\n\nWould be happy to discuss further if you\u2019d like? ", "replies": [], "depth": 1}, {"id": "e8aja1z", "text": "You already got some good advice from dukeaw, but I'll just add a couple of additional points related mostly to question 6:\n\nCommercial mortgage loans are different from residential mortgages in a couple of key ways:\n\n1. Just because you have $1 Million in principal left to pay on your loan, doesn't mean you won't need to refinance sooner. Most commercial mortgages have a set Loan Term that is shorter than the Amortization Period. The Amortization Period determines how much loan principal you have left, but the Loan Term determines when the bank can ask for the full amount back. Read over your loan docs to make sure you know if there is a big balloon payment coming up where you owe them the full loan. If the maturity date is coming, talk to someone about refinancing - compare multiple lenders' term sheets through a professional platform, and potentially take cash out at refinancing. You can work straight with banks and direct lenders if you'd like, but you'll likely be at a disadvantage due to lack of experience, and won't be able to negotiate the best rate and terms (or be able to find the right lender).\n2. Many commercial loans will have a Debt Service Coverage Ratio (DSCR) covenant. Let's say yours is 1.3x, not uncommon for an Office building. That means that your property has to have cash flow meeting at least 130% of the monthly mortgage payment. It's usually not a big deal when there are slight fluctuations, and most banks just care about getting paid, but it is technically a contractual obligation to keep your mortgage out of default. You mentioned the banker trying to screw you over already, so know how tight your DSCR is so you can avoid any issues.", "replies": [], "depth": 1}]