Commercial property for beginners guidance and help
Hello  all new here looking for some guidance.


 I'm currently planning to enter cre and to start with I picked a 4000 sqft lot which can be built for 1600 sqft commercial on first floor and residential second floor.

It's located on a prime area.. with rents upto 10per sqft.

I have been talking to a lot of people and many seem to be scaring me and asking me to back down.. so I wanted to ask you all and hoping to get some guidance.

Value of the plot 50k 
Construction still waiting on estimate

What would be the best place for a loan to build and land?
Can come up with 20% down

It's already zoned in the above mentioned way

What else do I need to consider and what are the stuff that I need to watch out for please let me know.

Thx in advance
[{"id": "gt7e3v6", "text": "Dirt is worth $50k but rents are $10psf? I\u2019m assuming that\u2019s monthly, if so something is off. If $10psf annually then that won\u2019t work either. Unless you have millions of dollars to burn you need to partner with someone.", "replies": [{"id": "gt8u238", "text": "10 psf yearly (tenant pays utilities n taxes). and the apt going rate inthat area is approx 1500 per month..", "replies": [{"id": "gt8v7to", "text": "How is the land worth $12.50psf yet the retail rents are only $10psf. Either your land is overpriced or your rents are too low. If $10psf is considered prime then I\u2019m assuming you\u2019re in a low income/cost of living area. I\u2019d work on bidding that land value down. Next, you\u2019re going to have to consider vacancy. You\u2019ll be paying all taxes, insurance, maintenance, etc until the space is leased up, which could take close to a year depending on your market", "replies": [{"id": "gt8zdtp", "text": "That's true.. realtor said going rate in the area was early teens.. I put it at 10 just to be safe side..\n\nRetail might be a while to lease out but residential should go pretty quick ..\n\nIt's in a very higly demanded residential subdivision.. land rates are too high.. hoping rental rates pick up in 5 years once all the nearby lots are constructed upon..", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gt7lrya", "text": "There are many factors to consider. The costs which will include entitlements, environmental, engineering, architecture and many others. Unless you have a tenant in which you are building for this may be to risky. I mostly focus in the retail sector but you should have someone signed before building.", "replies": [{"id": "gt7saqu", "text": "To add to that, permitting and TI allowance for tenant.", "replies": [{"id": "gt8r3cw", "text": "100%", "replies": [], "depth": 3}, {"id": "gt8u8c5", "text": "What's TI allowance?", "replies": [{"id": "gt8vkpi", "text": "Tenant improvements. It is typical for landlords to give an allowance to their tenants of say $10psf to renovate the place to fit their business. The landlord pays this (so 1600sf X $10psf = $16,000) upfront and then amortized it out in the rent. If your rent is $10psf then i don\u2019t think a potential tenant will ask for TIs or even know what they are", "replies": [{"id": "gt8ykfl", "text": "Thank you... I doubt I will be able to do tht.. thx for letting me know..", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "gt8vfvq", "text": "At $10psf, can a tenant really expect TIs?", "replies": [{"id": "gt96wzu", "text": "If it\u2019s shell space then yes but 2nd gen probably not", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "gt8u67k", "text": "This is something I need to find out more about it..\n\nThe plot is in a subdivision which is zoned for first floor commercial n second floor residential..", "replies": [], "depth": 2}], "depth": 1}, {"id": "gt7ltjv", "text": "You can't build a two-story outhouse for $50k.  Civil design and environmental permitting may cost that alone.\n\n$10sf is not great.  That is $16k/yr.  Taxes, insurance, utilities, lawncare, property management, etc add up quick.", "replies": [{"id": "gt7mqqy", "text": "I assumed $10 psf was NNN for the first floor retail tenant, so all the expenses you mentioned would be on top of that.\n\nAnd then OP would be able to rent out an apartment or two that is above the store.", "replies": [{"id": "gt8tvxr", "text": "That's correct.", "replies": [], "depth": 3}], "depth": 2}, {"id": "gt8ttai", "text": "As per the real estate agent that was the going rate and the tenants are responsible for taxes/utilities.\n\nNot enough place for lawn but would need some landscaping and have no plans for property management wanna try to manage it by myself.", "replies": [{"id": "gtebq18", "text": "Not enough place for lawn but would need some landscaping and have no plans for property management wanna try to manage it by myself.\n\nFriend, would strongly urge you not to pursue this route unless you\u2019re already experienced in commercial  management and know what\u2019s required to maintain the property. \n\nIf you decide to pursue this deal, contract an experienced manager and shadow them for some time and ask questions. If then you think you can take it on, terminate the contract.", "replies": [{"id": "gtekjkq", "text": "Thank you for this.. will reconsider my decision..", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gt8mr5d", "text": "*\"I have been talking to a lot of  people and many seem to be scaring me and asking me to back down.. so I  wanted to ask you all and hoping to get some guidance.*\n\n*Value of the plot 50k Construction still waiting on estimate*\n\n*What would be the best place for a loan to build and land?\"*\n\nWhat does \"*10per sqft\"* mean?\n\n(Reminds me of a story about a cart and a horse).", "replies": [{"id": "gt8tjtr", "text": "Rent is 10$ persqft per yr..", "replies": [], "depth": 2}], "depth": 1}, {"id": "gt8quqe", "text": "How do you know you can come up with 20% if you don\u2019t even have hard bids? My advice is to find and buy something existing with existing tenants.", "replies": [{"id": "gt8tmq4", "text": "Sorry should have put a limit... upto 60k ..was assuming total cost would be 300k", "replies": [], "depth": 2}], "depth": 1}, {"id": "gt95g8s", "text": "Do you know what the ballpark cost to build per sq ft should be in your area?\n\n3200 sq ft x $150/sq ft = $480k  \n$50k for the land  \nTotal cost: $530k\n\n$1500/mo gross rent for the apartment with 50% expense ratio is $9000/year  \n$10 psf for 1600 sq ft is $16,000/year\n\n$25k / $530k = 4.7 cap rate to get to \"replacement\" cost. Is that realistic in your market? Definitely not if the retail space is vacant.\n\nIf it is a 4000 sq ft lot, where is the other 2400 sq ft going? How much parking?", "replies": [{"id": "gtb0fvb", "text": "Property has 4 paved parking spots other than that I beleived the city approved build is for 1600sq.ft.. ill find out more on tht..\n\nI'm meeting up with a commercial builder next week to see what the estimated cost is to build", "replies": [], "depth": 2}], "depth": 1}, {"id": "gtandlm", "text": "In CRE 30 years. I agree with many others and would definitely not recommend constructing your first investment property. It is going to take a substantial amount of time and energy to get through the entitlement and permitting process-particularly if ur first time. I would buy something existing that maybe has some upside with some capital investment to start. It\u2019s much easier to manage the process and you\u2019ll learn from that so in the  event you want to get into any type of development you\u2019ll have more of an understanding.\nWhere I live the entitlement/permitting process for new construction is taking up to two years. Covid has slowed it some but it\u2019s extremely time consuming.", "replies": [{"id": "gtb0oh2", "text": "Thank you for this info.. Ill look into existing", "replies": [], "depth": 2}], "depth": 1}, {"id": "gto64kg", "text": "Good luck with the project! Try our new beta platform for CRE underwriting, you will find at least a summary of things to consider on the operation of a commercial property and please send me your feedback. There is a free trial version, the link: [https://www.realis.us](https://www.realis.us/)", "replies": [], "depth": 1}]