On how to take advantage of biggest real estate gold rush in 20 years.

[jon.a]

I agree with everything you said, except for one thing:

I am not only lazy, but bored too! I get OMs in email and I still look at them. But, everything I've ever bought that turned out any good has been a function of relationships. For me, right now, buying is inherently more risky than not buying. So, I will only take action on something that makes so much sense that I can't let it go. The marginal stuff - not interested

Funny thing is - I still see small deals that 5 years ago I would have jumped on. But, I can't get the same financing I got 5 years ago. And besides, the impact of smaller deals is just too marginal. The result - Ben is bored...what to do?

Keep building your tribe. Be ready to strike.

 

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[JustAskBenWhy]

Keep building your tribe. Be ready to strike.

Agreed! Besides, while these small deals aren't attractive to me, they certainly are for someone else. I am building CFFU right now, and enjoying it a lot. Internet marketing is a new world for me, but CFFU is good RE education for only a few hundred bucks, and I am having a blast figuring out a way to get it in the hands of as many bewbies as I can. Jon - did you know I had this?

 

[jon.a]

Agreed! Besides, while these small deals aren't attractive to me, they certainly are for someone else. I am building CFFU right now, and enjoying it a lot. Internet marketing is a new world for me, but CFFU is good RE education for only a few hundred bucks, and I am having a blast figuring out a way to get it in the hands of as many bewbies as I can. Jon - did you know I had this?

Had what?

 

[JustAskBenWhy]

Had what?

Hahaha - well, that answers that. Horrible - difficult to sell shit if nobody knows you'e got it. I've got to do better. CFFU

 

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[jon.a]

Hahaha - well, that answers that. Horrible - difficult to sell shit if nobody knows you'e got it. I've got to do better. CFFU

Yes I did. I'm an accidental landlord trying to advance out of the messy world of small scale RE. I not looking to study more about it. I'm spending more time studying funding deals not doing them.

 

[MKHB]

Ben,
You are getting lazy on us.

Real estate investing is very complicated. What works in the west or south may not work in the midwest or northwest. There are few general statements that can be made.

But when it comes to single family, you must either be able to time the markets or buy well below value. The typical landlord that buys and rents for a few dollars of profit a month will be eaten up in the long term by capital improvements. You cannot escape this unless you see appreciation or rent growth.

Some areas lend themselves to growth better than others but there are no guarantees.

I feel like apartments lend themselves to more ups and downs in these cycles. They are also more predictable. Then to top it off, more people screw up the operations on these and end up selling them as a distressed asset.

Then you also have economies of scale. I don't want to take a project on if there is not 200K or more of profit to be made. That is harder to do with single family.

I am no residential expert and have never had any success with SFR investing (outside of Southern California) it is just not worth the minimal cash flow, and even bigger problem for me is the vacancy loss and expenses every time the leases roll. Outside of some depreciation benefits, it strictly a long term capital appreciation story.

That being said, in Southern California, timing is not critical if it is a long term hold, due to the lack of supply and demand from off-shore investors.

 

[JustAskBenWhy]

Yes I did. I'm an accidental landlord trying to advance out of the messy world of small scale RE. I not looking to study more about it. I'm spending more time studying funding deals not doing them.

Ha I didn't mean you, Jon. Just wondering if the word is getting out...besides, I bet quite a few folks here would benefit!

 

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[MKHB]

I'm a mortgage broker and want to develop relationships with commercial developers for referrals or just to be mentored so I can one day develop myself, how would i approach them?

If your a mortgage broker that should be easy, talk with them about their capital and re-capital needs. Call them, tell them what you do and how can I help you (mortgage needs). Study the markets they are in, read up on the players, the trends, track the deals, become an expert in that market.

 

[MKHB]

Whats your experience investing in residential RE?

Minimal with poor short term results. I only buy houses I live in or plan to live in and sometimes I manage to even screw that up.

 

[MKHB]

 

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[CommonCents]

I bought my commercial building not long ago from the bank. Former CRE owner went belly up on a sizable light industrial portfolio in the crunch and the bank had it awhile. The bank got tired of the headaches trying to raise our rent (I never drove my Bentley to work! Esp when the banker would come by). The former owner actually approached w/a partner deal 50/50 to buy, he'd do all the paperwork and get mezzanine financing(insurance companies do this). Bennies were he does all the work, and we reduce our annual lease/rent cost now in form of a mortgage. I ended up just paying him a referral fee and did it myself, and reduced annual costs by nearly $70 grand. I just had to put a little down and our biz bank did CRE lending and did the deal. Building in good shape, good roof report. Good thing is I knew the tenant well (me) and the shape of the building. The risk is taking on all building expenses but in many leases the tenant ends up paying most of the CAM/improvements anyway.

But for most business owners, who are concentrated on their business, his partner deal was an intriguing pitch, I almost bit. He is going to make a passive fortune on his own belly up portfolio doing these deals. It is a very intriguing business that I'm going to look into more for on the side. He's done 4 of them. A 50/50 partner in 4 buildings with nothing down out of his pocket. "saved" the owners on rent, gave them equity upside and security in owning their own building, not vulnerable to a rogue landlord jacking up rent forcing them to move operations(a pain in the arse). He does a little paperwork, accounting/legal for the new LLC and cashes checks.

 

[MKHB]

I bought my commercial building not long ago from the bank. Former CRE owner went belly up on a sizable light industrial portfolio in the crunch and the bank had it awhile. The bank got tired of the headaches trying to raise our rent (I never drove my Bentley to work! Esp when the banker would come by). The former owner actually approached w/a partner deal 50/50 to buy, he'd do all the paperwork and get mezzanine financing(insurance companies do this). Bennies were he does all the work, and we reduce our annual lease/rent cost now in form of a mortgage. I ended up just paying him a referral fee and did it myself, and reduced annual costs by nearly $70 grand. I just had to put a little down and our biz bank did CRE lending and did the deal. Building in good shape, good roof report. Good thing is I knew the tenant well (me) and the shape of the building. The risk is taking on all building expenses but in many leases the tenant ends up paying most of the CAM/improvements anyway.

But for most business owners, who are concentrated on their business, his partner deal was an intriguing pitch, I almost bit. He is going to make a passive fortune on his own belly up portfolio doing these deals. It is a very intriguing business that I'm going to look into more for on the side. He's done 4 of them. A 50/50 partner in 4 buildings with nothing down out of his pocket. "saved" the owners on rent, gave them equity upside and security in owning their own building, not vulnerable to a rogue landlord jacking up rent forcing them to move operations(a pain in the arse). He does a little paperwork, accounting/legal for the new LLC and cashes checks.

This is was one of Trump's favorite strategies.

Kind of a non-arms length distress "sale leaseback," only with tenant participation. The tenant gets the benefits of partial ownership and security (no rent increases) and participation in any future appreciation. This strategy works great, because as you state, industrial buildings are mostly structured on a triple net or industrial net lease basis and their is little risk for the landlord.

So as I understand: the landlord/owner (if you had agreed-you didn't-that's awesome) would be putting this deal on without any out of pocket cost, because he would be placing high interest mezz debt (7-9%) and as you pay your rent and the loan gets amortized, the LTV will drop and he would swap the high interest mezz (8-10%) with long term fixed debt (4-5%) and engage in a form of financial re-engineering or arbitrage.

The CRE owner would basically be monetizing your good credit (history and ability to pay rent) to fund his share of the ownership.

Brilliant, because as you say... most successful operators are busy with their enterprise and do not want to play landlord.

 

[CommonCents]

yep, pretty much. after my busy holiday season i'm gonna snoop around to see how many of these deals are around.

This is was one of Trump's favorite strategies.

Kind of a non-arms length distress "sale leaseback," only with tenant participation. The tenant gets the benefits of partial ownership and security (no rent increases) and participation in any future appreciation. This strategy works great, because as you state, industrial buildings are mostly structured on a triple net or industrial net lease basis and their is little risk for the landlord.

So as I understand: the landlord/owner (if you had agreed-you didn't-that's awesome) would be putting this deal on without any out of pocket cost, because he would be placing high interest mezz debt (7-9%) and as you pay your rent and the loan gets amortized, the LTV will drop and he would swap the high interest mezz (8-10%) with long term fixed debt (4-5%) and engage in a form of financial re-engineering or arbitrage.

The CRE owner would basically be monetizing your good credit (history and ability to pay rent) to fund his share of the ownership.

Brilliant, because as you say... most successful operators are busy with their enterprise and do not want to play landlord.

 

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[MKHB]

yep, pretty much. after my busy holiday season i'm gonna snoop around to see how many of these deals are around.

Cool, PM me on your findings...industrial is super hot right now.

MK

 

[John Monarch]

I live in the southeast on the I85 corridor (Greenville) - been looking at getting involved since this is the fastest growing part of the country. Any tips on multifamily via USDA financing (have a good area with a college that fits the criteria), or generally raising funds for apartment building purchases?

 

[MyronGainz]

Nice thread... any thoughts on Canada?

 

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[MKHB]

I live in the southeast on the I85 corridor (Greenville) - been looking at getting involved since this is the fastest growing part of the country. Any tips on multifamily via USDA financing (have a good area with a college that fits the criteria), or generally raising funds for apartment building purchases?

I thought USDA was primarily for SFR in rural areas, the usual requirements...660 FIC0/ payment for mortgage and PITT <29% of monthly income or no more than 41% max of income factoring in all monthly debt. If you're raising $ for MF you will need to raise at least 25% of the deal from private investors or a get a local sponsor to JV with.

You may need to walk before you run.

Thinks facilitator not investor.

Don't get hung up owning. Why would you want to own right out of the gate; real estate is the only business where people become owners before they become experts. This would be unheard of with any other business.

Focus on building your brand as: the expert, the deal maker, the guy who knows the numbers (market data) cold, the go to guy for your niche, the hustler who knows everyone and where all the bones are buried.

Think Idea Extraction:
Read the threads where some of the guys on TMF have to cold call and chase CEOs and get if they're lucky, get maybe 1 out 10 to talk to them and tell them their needs; RE is different.

I guarantee that if you call 20 real estate investor/developers, all 20 will get on the phone and tell you exactly what they need; what they will pay, where they want it, the time they want to close, and what they are willing to give you to find it. Yes it is that simple.

Get to hustling....find the deals (preferably off market) take them to active players in the area and cut a deal to exchange your finders fee/your labor as project manager (if it is a value add property) or your time serving as property or leasing manager for a small stake in the deal or part of the next deal.

You are right I85 is hot, it's Amazon country. You also might want to look at the industrial plays, E-commerce and Panamax (canal widening project) has helped Charleston/Savannah become some of the busiest ports in the US and make the I85 corridor a hot spot for inland port support and logistics.

If you can't create opportunity for yourself due to a lack of resources, do the next best thing -provide it to someone else. Every real estate pro needs opportunities (deals/leads/off-market opportunities) and by solving this need, you create demand for your brand and solve your need.

 

[MKHB]

Nice thread... any thoughts on Canada?

I am not that up on Canada, but I assume it is experiencing the same activity and speculation as we are in the states, especially you're area- Toronto.

Toronto is the coolest city on the planet, went once and absolutely loved that place.

 

[Mark Anthony Le]

@JustAskBenWhy I can't help but realize that youre the same Ben Leybovich from Bigger Pockets. Astounding how small the world of entreprenuership is. Awesome that youre on the main forum I frequent.

I've recently started dipping my feet into real estate investing on triplexes and have listened to your podcast from BP. It's helped me a bunch.

Thanks brother.

 

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[JustAskBenWhy]

@JustAskBenWhy I can't help but realize that youre the same Ben Leybovich from Bigger Pockets. Astounding how small the world of entreprenuership is. Awesome that youre on the main forum I frequent.

I've recently started dipping my feet into real estate investing on triplexes and have listened to your podcast from BP. It's helped me a bunch.

Thanks brother.

Haha - I'm not doing so good at hiding my identity, am I?

Thanks for reaching out, man. And thanks indeed for the kind words! I'm glad to help. Understanding RE really opened some doors for me. Glad to help

 

[JustAskBenWhy]

@JustAskBenWhy I can't help but realize that youre the same Ben Leybovich from Bigger Pockets. Astounding how small the world of entreprenuership is. Awesome that youre on the main forum I frequent.

I've recently started dipping my feet into real estate investing on triplexes and have listened to your podcast from BP. It's helped me a bunch.

Thanks brother.

Nice talking with you last night, Mark Anthony!

 

[rc08234]

I'm already in the SFR re game somewhat but am looking for something different. What is Energy Management?

 

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[Mark Anthony Le]

Nice talking with you last night, Mark Anthony!

Thanks Ben!

I'm looking into your CFFU soon. Looks great.

Talk to you soon.

 

[CommonCents]

This is was one of Trump's favorite strategies.

Kind of a non-arms length distress "sale leaseback," only with tenant participation. The tenant gets the benefits of partial ownership and security (no rent increases) and participation in any future appreciation. This strategy works great, because as you state, industrial buildings are mostly structured on a triple net or industrial net lease basis and their is little risk for the landlord.

So as I understand: the landlord/owner (if you had agreed-you didn't-that's awesome) would be putting this deal on without any out of pocket cost, because he would be placing high interest mezz debt (7-9%) and as you pay your rent and the loan gets amortized, the LTV will drop and he would swap the high interest mezz (8-10%) with long term fixed debt (4-5%) and engage in a form of financial re-engineering or arbitrage.

The CRE owner would basically be monetizing your good credit (history and ability to pay rent) to fund his share of the ownership.

Brilliant, because as you say... most successful operators are busy with their enterprise and do not want to play landlord.

Ended up having happy hour last month with a couple biz owners in area w/ same situation in building lease interested in a partnership purchase. One of 'em will be likely to close. Funny how things work when ya keep your eye out. haha.

 

[samdee]

What?

Haha

@smartman

CRE is at an inflection point.

There has been considerable amount of wealth generated in the last 48 months, with some markets now showing overbought. This will continue because we now have supply in the pipeline because development is back and it takes years for this inventory to get in the system. For every crane (dev. project) you see in your area - there are 6 more in some stage of inception ( finance stage/entitlement/plan check/per permit).


This period creates a tremendous amount activity (selling, buying, leasing, building, recycling,re purposing) a "need" is created where the big players cannot handle all of the activity and creates opportunity for eager, ambitious newcomers to take advantage of opportunities that would not normally be as easily had. Also bear in mind that despite what you may think, big players (CBRE/Cushman,etc.) capture less than 10% of all transactions the rest is performed by non institutional operators.

In other words it is like a stock market run up - winners want to lock in their gains by selling/re-positioning and those still on the sidelines (new capital) is now desperate to put it in place (buy). You have to understand the mindset of the slowlaners in this business (I was one) , this is no place for independent thinking, all you want to do is hide. Buy what everyone else is buying.

It's OK to loose as long as you lost doing the same as your competitors - but if you sat on the sidelines during a run-up your toast.

Sent from my SM-G530H using Tapatalk

 

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[TheBaker]

Ask me how to take advantage of the coming tsunami of activity in :

Commercial Development
Landlord Leasing
Tenant Rep Leasing
Asset Management
Property Management
Construction Manager
Asset Management
Energy Management
LEED Consulting
Energy Star Modeling
1031s
Reverse 1031'
Sale lease backs
Build to suits
Creative work space
Live work space
Recapitalization

If you had $1M in cash and we're in NYC, Richmond VA, or Orlando FL where or what would you allocate most of the money too?

 

[TheBaker]

Allocate it to a bank until you really understand the investment assets you want to pursue.

Regardless of what threads like these might imply, large scale investing (real estate or otherwise) is a complicated business that takes years to learn and decades to master. If you have $1M to throw around and don't mind losing it, then by all means take a chance on something and see what you learn -- you may even get lucky and make some money. But, assuming you don't want to lose any significant portion of that $1M, spend a few months learning about real estate, understanding the various niches, understanding the time/temperament/skills required to succeed in your desired niche, and then find some local experts to help you get some experience before you allocate all your cash.

Appreciate the info lets assume you have 1 yr experience, have 7 no mortgage, cash flowing properties but not sure as to what market to pursue since feds will raise int rates and prices will drop. I've been in SFR but feel its time to graduate.

 

[MKHB]

If you had $1M in cash and we're in NYC, Richmond VA, or Orlando FL where or what would you allocate most of the money too?

It all depends on your experience, abilities, time horizon (your age) and appetite for risk; and if you are considering making money "in" RE or making money "owning" RE.

If you're new to RE: don't over complicate it. Get educated, complete the CCIM curriculum (about 12K/6 weeks) and get a RE license (1K/3 weeks), seek our successful RE investors/developers in your target areas and find them deals, learning the biz while paying the bills with brokerage commissions. And while doing this dip your toe into the "ownership" side via crowd funding with other vetted investors with proven track records. This will allow you to take small stakes 10K and be privy to sophisticated deals of all types of food groups MF/Office/Retail/Development and how the reporting and waterfalls (investor/sponsor) payouts are structured. Avoid the "real estate advice for sale" crowd, unlike crowdfunding or syndicates, they make money "from" you not "with" you.


If you're experienced in real estate: I would lend to the clients of the get rich flip crowd in non-judicial foreclosure states. You can't beat hard money returns of 8-9%. Obviously you will need to do proper underwriting LTV/DSCR etc and be ready to take possession of the asset so you need to have some operational ability. Get prolific at selling picks and shovels and be ready to pick up a gold mine or two

Richmond- experiencing a renaissance but minimal job creation expected in the near term.
NYC- about as overbought of a market as you can get.
Orlando- great job growth prospects, but it is Florida - and when Florida corrects - it corrects like nowhere else.

CRE is all about job growth. And job growth is all about millennials and millennials are all about TTS (transit/tech/science). Follow the
the TTS - SF/LA/SD/AZ/TX/Boston/Raleigh-Durham and you willl propser. And yes some of these markets are overbought but if your
time horizon is long enough, location always trumps timing/entry.

 

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[TheBaker]

It all depends on your experience, abilities, time horizon (your age) and appetite for risk; and if you are considering making money "in" RE or making money "owning" RE.

If you're new to RE: don't over complicate it. Get educated, complete the CCIM curriculum (about 12K/6 weeks) and get a RE license (1K/3 weeks), seek our successful RE investors/developers in your target areas and find them deals, learning the biz while paying the bills with brokerage commissions. And while doing this dip your toe into the "ownership" side via crowd funding with other vetted investors with proven track records. This will allow you to take small stakes 10K and be privy to sophisticated deals of all types of food groups MF/Office/Retail/Development and how the reporting and waterfalls (investor/sponsor) payouts are structured. Avoid the "real estate advice for sale" crowd, unlike crowdfunding or syndicates, they make money "from" you not "with" you.


If you're experienced in real estate: I would lend to the clients of the get rich flip crowd in non-judicial foreclosure states. You can't beat hard money returns of 8-9%. Obviously you will need to do proper underwriting LTV/DSCR etc and be ready to take possession of the asset so you need to have some operational ability. Get prolific at selling picks and shovels and be ready to pick up a gold mine or two

Richmond- experiencing a renaissance but minimal job creation expected in the near term.
NYC- about as overbought of a market as you can get.
Orlando- great job growth prospects, but it is Florida - and when Florida corrects - it corrects like nowhere else.

CRE is all about job growth. And job growth is all about millennials and millennials are all about TTS (transit/tech/science). Follow the
the TTS - SF/LA/SD/AZ/TX/Boston/Raleigh-Durham and you willl propser. And yes some of these markets are overbought but if your
time horizon is long enough, location always trumps timing/entry.

Thanks for the info.
What would be the top 10 books to read?

 

[TheBaker]

Are you happy with 8-10% returns?

If so, since you know the residential market and you already have investments, I would 1031 the SFRs, along with the cash you have on-hand, into a larger investment. Perhaps an 8-20 unit residential building. You'll get lower returns without leverage, but unless you're able to get a fully amortized loan, I wouldn't be excited about leveraging commercial real estate today knowing that interest rates are likely to rise in the next 60 months. Keep in mind that when interest rates rise, cap rates will likely do the same thing.

In many areas, a cash investment on an 8-20 unit stabilized building with decent management should generate at least 8% returns. Take a little more risk, and 10% shouldn't be impossible either.

I'm averaging about 14% Cap on these SFR.
Literally the management company makes or break you in this biz.

Kudos on the 1031 idea had it in the back of my head but never took action. Would be pretty neat to wrap it all into a portfolio and let it go.
Right now in my deal pipeline I have a 88,000 sq ft office building in the heart of north florida completely vacant for $2M. Problem however is serious water damage I estimate atleast $1M to fix and reissue any certificates needed. I never dabbled in commercial real estate or office buildings so I have no clue. Broker is telling me on avg lease rate per sq ft is $16 seems to good to be true.