Just closed on my 2nd building (1st one much smaller). Nervous and Excited!
[{"id": "dyt2k8f", "text": "Nice! Congratulations!\n\nMind sharing the deal details?", "replies": [{"id": "dyt2r3p", "text": "Agreed, would like to hear about whatever you feel comfortable sharing.", "replies": [], "depth": 2}, {"id": "dyt32n4", "text": "Absolutely I love to brag hahaha!\n\nProperty was in estate, the owner actually invented the machines that make dental floss believe it or not.  It\u2019s 42k sq ft, purchase price of 2.25M.  Normally properties in this area go for at LEAST 130-140 per sq ft but I just happened to make an unsolicited offer at exactly the right time (estate was out of money and could not keep up with expenses on the building).  Neighboring building is 50k sq ft and currently on the market for 7M.\n\nCurrently 50% occupied, pays for itself and debt service.  Has one of the largest solar panel arrays in lower Fairfield county, 150 parking spaces, and the 4th floor has 30ft ceilings with exposed steel support beams.  \n\nI still can\u2019t believe the deal I got and I\u2019m certain I\u2019ll never get one like it again in my life.  Now all I gotta do is rent out 20k of office space \ud83d\ude2c", "replies": [{"id": "dyt3gg5", "text": "That is AMAZING!!!\n\nIf it was an unsolicited offer, how did you know it was in estate? How did you find that deal?  (Asking so I can do the same thing in my area). ;-)\n\nI've got 2 properties myself, a tad less source range than this, but similar, but much, much (much) smaller.  Actively looking to add a third, but my broker has been showing me the typical 5.5-7 cap NN(N} stuff you see on the market. Would love some pointers!!", "replies": [{"id": "dyt4lrb", "text": "Well first of all I\u2019m a broker myself so that is convenient.  As for this deal it really was dumb luck, but I was approached by another broker who happened to do a very small lease with me a few years ago and remembered that I was looking for commercial buildings (I talk a lot).\n\nAs for getting a higher cap I typically don\u2019t just rely on loopnet or whatever MLS your broker has - I talk to everyone and anyone.  Even when I see that look in their eyes where they\u2019d rather be anywhere else but talking to me I plow ahead.  Commercial real estate is a much smaller community than residential so \u201cmaking a name for yourself\u201d really does have value.  If people in your area associate you with someone who is looking to invest, then that will pop into their mind when the topic comes up.\n\nThat, and I don\u2019t go after NNN properties.  Triple net sounds great and all but the old saying stands true - if it were easy, everyone would be doing it.  Both buildings I bought were half full and tenants pay their utilities and what not.  But because I\u2019m willing to do the hard work to lease out the properties, my cap rates are much higher potentially.\n\nAnd lastly - always be looking around when you\u2019re out and about.  See that old building?  That empty lot?  Any sort of construction at all?  Pull over, look for any signage that would indicate any potential development.  Google your target area with key words like \u201cdevelopment\u201d or \u201czoning permit\u201d or \u201cplans approved\u201d.  You\u2019d be surprised how early on in the development stage certain info is available to the public.  Then start making a map - literally a map of all these things you find - and begin to target properties in that location.  This step is so important when looking at properties that are less than fully occupied, maybe need some work, aren\u2019t triple net, etc.  If you can paint a picture of where an area will be in 3 years you can make educated, planned purchases and reap the equity gains.  It sounds like something so simple but the truth is that most people don\u2019t do this, even though it\u2019s readily available to them.\n\nIn the case of my building, it sits directly across the street from one of the oldest affordable housing projects in the state.  That said a few years back the Choice Neighborhoods Initiative submitted plans for a complete tear down of these projects and a transformation to mixed income apartments, retail, etc.  In addition the SoNo Collection (last major mall to be built in US), Marriott, and projects by Spinnaker Group and FD Rich, were all planned out for years in advance - I simply connected the dots.\n\nSorry to ramble on I hope this helps.  I love this stuff!", "replies": [{"id": "dytunau", "text": "Amazing post!", "replies": [], "depth": 5}, {"id": "dyu8ezy", "text": "This is the best post I have ever seen on this sub. I didn\u2019t know dealmakers actually visit this sub, TIL. Thank you good sir", "replies": [{"id": "dyui5b1", "text": "Stop inflating my ego so much hahaha", "replies": [], "depth": 6}], "depth": 5}, {"id": "e07lrpi", "text": "That, and I don\u2019t go after NNN properties.  Triple net sounds great and all but the old saying stands true \\- if it were easy, everyone would be doing it.  Both buildings I bought were half full and tenants pay their utilities and what not.  But because I\u2019m willing to do the hard work to lease out the properties, my cap rates are much higher potentially.\n\nWould you mind explaining this in more detail? Why would you not want tenants responsible for covering OP costs? Is it because you are able to get higher rents and you work on extracting some value in the OP costs? ", "replies": [{"id": "e07q4nw", "text": "Wouldn't mind at all!  I think NNN investments can definitely work for some people \\- specifically those who are buying in cash and who are comfortable with average cap rates of 5\\-6&amp;#37;.  If you're financing like me, those cap rates just won't work for obvious reasons.\n\nMy point is that literally ANYONE can go look up a loopnet or costar listing and find a building that's fully rented with NNN.  If you truly want a good deal you have to do your homework and take a risk \\- i.e. buying a building that's not fully occupied.  Take my father in law, for example.  He's chinese and owns several laundromats.  There are plenty of laundromats out there for sale all the time, but there's always a catch.  Either it's not making money or the machines are old and in need of replacement soon.  The underlying truth is that if someone owns a laundromat with new machines AND it's making good money... why would they sell it??  Same thought goes with a NNN property.  They don't really require any hands on work since the tenant takes care of everything, so the only way you're going to find one for sale is by paying a premium for it.\n\nI have found a tremendous amount of success in finding buildings in developing areas with straight forward lease agreements.  It's easier to find long term tenants, and if you're smart about who you hire for repairs, how you write off taxes/expenses, etc you can make a LOT more money than you could with a NNN property.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "dyt3yq7", "text": "Thank you for the post! Was this a syndicated deal?", "replies": [{"id": "dyt4oaj", "text": "Forgive my ignorance but not sure what that means?  I represented myself (I\u2019m a broker) and the broker who came to me has the leasing rights but knew they\u2019d sell if they got an offer and so he came to me directly.", "replies": [{"id": "dyt8kd2", "text": "Syndicate is where you pool multiple investors to finance the deal. You make $ 4 ways. Syndication fee. Asset management fee, % ownership income &amp; when you sell. ", "replies": [{"id": "dyt9h7d", "text": "Oh ok.  No I\u2019m in on this by myself", "replies": [{"id": "dytahva", "text": "What are your loan parameters?  Do you have a good relationship with a bank?", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "dyt5gb0", "text": "Does your solar array offset all energy costs?", "replies": [{"id": "dyt5wfv", "text": "It\u2019s only connected to the 4th floor right now, but it is a 50kwh system so technically it should be able to.  I\u2019m researching storage capabilities right now.", "replies": [{"id": "dythiq8", "text": "Storage is usually expensive and inefficient.  Rather than storage, generally what makes more sense is to sell the extra energy back to the power company (\"net metering\").  Basically your electricity meter just runs backwards and the power company pays you for the power.", "replies": [], "depth": 5}, {"id": "dytovae", "text": "Look into ice batteries", "replies": [], "depth": 5}, {"id": "dyv4e1e", "text": "No need if the grid is reliable. With enough Green outfitting (LED bulbs, Smart thermostats, New AC) you should quickly offset all of your power or at the least half of your power. The reward is worth it. ", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "dytdcif", "text": "Sounds like an amazing deal!  GJ man...", "replies": [], "depth": 3}, {"id": "dytn3os", "text": "I'm a lender on the west coast and seeing TI / LC packages of $120/ft+... What are you budgeting? What are market rents there (Connecticut right?)... that's an amazing basis but part of me is skeptical... is there like $100/ft of deferred maintenance or environmental contamination or something?\n\nIf not, you made a great purchase!", "replies": [{"id": "dytqtk7", "text": "No - it definitely needs some shoe polish on the 3rd and 4th floors, and the parking lot needs a complete overhaul, but other than that it\u2019s in very nice condition.  The 4th flood build out for an upscale tenant may run me 200k or so but with 30 ft ceilings and views of the sound it\u2019s gonna be worth it. ", "replies": [], "depth": 4}, {"id": "dyzy4kt", "text": "I\u2019m a lender on the east coast - $120/sf in TI is crazy. I feel like I typically see $40-$50. Don\u2019t get me wrong it can get up there but man... ", "replies": [{"id": "dz01a4e", "text": "I mean I may be over dramatizing a little... but Wework just got that at a building I did the loan on last year...", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "dytoorz", "text": "Just looked it up on costar. The seller bought it in '09 for $182K - they made a pretty damn good return too. Looks like it was built in 1930. In-place rents of $18/ft vs market of $25 +/-. Market vacancy is about 15% with sales averaging $200/ft for class B. Property was significantly vacant a few years ago... 80% or so. They probably didn't want to put any $s into the building.\n\nHope you got a nice budget for leasing and capex. at that basis, you're going to make some serious dough!", "replies": [{"id": "dytqpx2", "text": "Nice info - they actually bought it for a lot more in 09 I think that may have been a refinancing or something.  The dental floss guy had it since 1994 according to title.\n\nI do have a good amount of capital for outfitting and a budget in place with the bank for build outs.  All said and done if I can rent the remaining floors out for $18 (SoNo average is $20 at least, even goes as high as 30/35 for prime space) I will have a NOI of 525k.", "replies": [{"id": "dytwt5h", "text": "For what it's worth, I'd likely be underwriting 12-15% vacancy, 45%-50% opex expense for stamford msa, so roughly $350K in NOI. That's a 15% cap on your purchase. Once you get it leased up, you could probably pull $2.8-3.2M out at a 12.5% debt yield which is pretty comfortable and a rate of ~4.75% (2.0x DSCR). Might even be able to get some IO depending on the rollover and loan term.", "replies": [], "depth": 5}, {"id": "dyudcxp", "text": "Hit me up when you\u2019re ready to refi! I know a loan originator or 3.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "dytp9kh", "text": "Find a good realator", "replies": [], "depth": 3}, {"id": "dyu26g9", "text": "How easy or hard is it to rent office space? I've never looked into it, but it seems like it takes time to find tenants. As a real estate agent it might be easier for you to advertise and find tenants.\n\nI invest in multifamily. I've been curious about office space but it's one area of commercial I've never seen anyone talking about.", "replies": [{"id": "dyvijd6", "text": "It takes time for sure but the rates are much higher than residential and 5-7 year leases are pretty common.  I like it much more than residential for those reasons and the fact that your \u201ctenants\u201d are much more professional and straight forward (for the most part).", "replies": [{"id": "dyvj4a5", "text": "Are you self managing? How much property management is required? I'm thinking fewer tenants and longer leases should mean you need maintenance people but not as much property management.\n\nHave you found any courses that provide training on how to evaluate and acquire office buildings? Thanks.", "replies": [{"id": "dyvjkoq", "text": "I do everything myself.  Right now there are 3 tenants and at full capacity it will be anywhere from 4-8 tenants.  My other building has 3 total tenants.  Really it\u2019s not as hard as it sounds...  problems come up, I take a look, and then call a professional to fix it.  After a while you gain a collection of reliable subs who you can trust to not rip you off and you\u2019re good to go.  Also I pay for a good accountant!", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "j1kq2ta", "text": "Details on how you got the loan please. I would like to get into commercial real estate", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dyt64ls", "text": "Huge congrats man. I\u2019m a multi family man and am always interested in hearing what attracts investors to other product types. Do you see a solid tenet synergy or demand for office product? The fact that they pay nets is awesome! ", "replies": [{"id": "dyvirwa", "text": "Thanks!  They don\u2019t actually pay nets they pay their utilities only.  Still even with the operating expenses the potential cap rate is almost 20% when fully rented.\n\nAs far as my view on the commercial leasing market - I can only comment on the areas I am invested in.  South Norwalk is a nice little bubble that has a direct train into manhattan, and is rapidly developing into a great destination for young professionals.", "replies": [{"id": "e2mniaa", "text": "&gt; the potential cap rate is almost 20% when fully rented.\n\nWhy would think you want a higher cap rate?  That is set by the market.  You want a higher value.", "replies": [{"id": "e2mohrm", "text": "I\u2019m talking about my own cap rate.  Yeah if I wanted to sell it I would base the price off a 7 or 8% cap rate.", "replies": [{"id": "e2mov5g", "text": "&gt; I\u2019m talking about my own cap rate.\n\nNo, \"your own cap rate\" is the one you created at the time of your purchase.  And by definition a cap rate is the market value of the NOI being bought.", "replies": [{"id": "e2mp4mh", "text": "I see exactly what you\u2019re saying.  I\u2019ve been just saying cap rate as a substitute for roi for so long it just became a habit hahaha.  ", "replies": [{"id": "e2mpk6c", "text": "Exactly!  I was getting really frustrated with reddit because of the people that were using terms incorrectly and then fighting to the death when called out.  Thanks for your clarification.  :-)  P.S. Good job on the purchase.  Who do you think your new tenants will be, full floor tenants, etc.?", "replies": [{"id": "e2mqxq9", "text": "I\u2019m going after tech and ad agencies, but I\u2019ll take anyone as long as they pay!", "replies": [{"id": "e2mufmw", "text": "Tech probably wants to contract and expand at will.  Doesn't seem like you would be capable to do that.  Are there still ad agencies?  Do you have any idea of the typical space they use.  Why not law offices, title companies or real estate offices?", "replies": [{"id": "e2mum6c", "text": "Agree on all points - tech and ad agencies just feel like more fun.  If a lawyer wants the remaining 20k sq ft I\u2019m all for it!", "replies": [{"id": "e2my36n", "text": "Lawyers want big TI's.  So Don Draper or Darren Stevens ad agency?  Sounds like you are having fun and have a great attitude.  Too many people want to take the fun out of real estate.  Enjoy your investment!", "replies": [], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dytodpk", "text": "Congrats on a nice find !!!\n\nNow rent it up and flip that fucker !!!", "replies": [{"id": "dyuaoa1", "text": "Thank god you didn't post this in r/RealEstate or r/RealEstateInvesting ... you would have been down voted to hell by all the little fuckers who don't think deals like this are possible. ", "replies": [], "depth": 2}], "depth": 1}, {"id": "dytz9pm", "text": "Congrats!!", "replies": [], "depth": 1}, {"id": "dyu4kgh", "text": "Congrats ", "replies": [], "depth": 1}, {"id": "dyukqhc", "text": "Man this is awesome! Congratulations. Mind speaking as to how you financed? Did you do 20-30% down? I know Fannie and Freddie are king in the multi family cre world, but I don\u2019t know as much about office ", "replies": [{"id": "dyvit9a", "text": "20 down - 25 year amortization 10 year fixed.  I have a good relationship with Berkshire.", "replies": [], "depth": 2}], "depth": 1}, {"id": "dyul2o6", "text": "Congrats. Thanks for all the details.", "replies": [], "depth": 1}, {"id": "dywfuuk", "text": "Awesome, congrats. Love to see more inspiring stuff like this on this subreddit. Hope it all works out... cheers", "replies": [], "depth": 1}]