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Updated about 2 years ago, 10/17/2022
Prepping for my first pitch to investors!
Hello! I am preparing for my very first deal to pitch to investors and wanted to see what details I might be missing that an investor would like to see. I have the basic info but am not experienced enough to know obvious things that are missing from the details presented. Would love any feedback on how to put my best foot forward in this venture!
This off-market deal is 2 pieces of adjacent land (3.29 acres and .25 acres) that are zoned as General Industrial (M1 zoning in Yavapai County AZ. Details at bottom of post*). There is one office building on the land that has around 8 offices with break rooms, bathrooms, kitchens, etc.
The land and office space is mostly rented out and it brings in $10,200 in net rents per month ($11,600 income and $1,400 in expenses). There are 7 different tenants, six of whom are month to month but want to renew for longer-term leases. The owners want $2 million for the land and building and are not interested in financing any portion of it themselves.
THE BREAKDOWN
TENANTS
The building is two stories with a footprint of around 4900 sq. ft. and an additional 1552 sq. ft. upstairs. Total square footage is 6481. Some of the building is shop space that runs the full height of the building. The current tenants include a vehicle repair shop, concrete pouring company, Well-drilling company, food company, Industrial cable company, freight company, and diesel fueling station. Three tenants lease only yard space, three lease office space and yard space, and one leases just office space.
EXPENSES
The only recurring expenses the owners have are about $9,000/yr taxes and insurance, $400/mo in utility bills not paid by tenants, and $250/mo for office cleaning services.
VALUE ADD OPPORTUNITIES
My surface analysis is that most, if not all of the rents are below market and could be bumped up 10% or more as part of signing new leases. There is also about one acre of land that is currently being used as free overflow parking, scrap storage, convenience roadway and other random things. This space could easily be cleaned up, partitioned off, and used for a business in need of this special industrial zoning for their long-term operations or even simply adding a gate, a little more fencing, lighting, and 20-30 storage sheds/containers that could be rented out for $200+/mo each.
That concludes the basic details of the deal I am working on. Anything blatantly wrong/off about it? Would the deal make sense to a seasoned investor? What kind of equity/cashflow split might entice an investor to be interested? Negative criticisms are welcome as well! Thank you so much!
*M1 Zoning info is on pages 52-53 of https://yavapaiaz.gov/Portals/0/OrdinancesRegulations/Ordinance-Planning-Zoning.pdf
Quote from @Jared Haxton:
Hello! I am preparing for my very first deal to pitch to investors and wanted to see what details I might be missing that an investor would like to see. I have the basic info but am not experienced enough to know obvious things that are missing from the details presented. Would love any feedback on how to put my best foot forward in this venture!
This off-market deal is 2 pieces of adjacent land (3.29 acres and .25 acres) that are zoned as General Industrial (M1 zoning in Yavapai County AZ. Details at bottom of post*). There is one office building on the land that has around 8 offices with break rooms, bathrooms, kitchens, etc.
The land and office space is mostly rented out and it brings in $10,200 in net rents per month ($11,600 income and $1,400 in expenses). There are 7 different tenants, six of whom are month to month but want to renew for longer-term leases. The owners want $2 million for the land and building and are not interested in financing any portion of it themselves.
THE BREAKDOWN
TENANTS
The building is two stories with a footprint of around 4900 sq. ft. and an additional 1552 sq. ft. upstairs. Total square footage is 6481. Some of the building is shop space that runs the full height of the building. The current tenants include a vehicle repair shop, concrete pouring company, Well-drilling company, food company, Industrial cable company, freight company, and diesel fueling station. Three tenants lease only yard space, three lease office space and yard space, and one leases just office space.
EXPENSES
The only recurring expenses the owners have are about $9,000/yr taxes and insurance, $400/mo in utility bills not paid by tenants, and $250/mo for office cleaning services.
VALUE ADD OPPORTUNITIES
My surface analysis is that most, if not all of the rents are below market and could be bumped up 10% or more as part of signing new leases. There is also about one acre of land that is currently being used as free overflow parking, scrap storage, convenience roadway and other random things. This space could easily be cleaned up, partitioned off, and used for a business in need of this special industrial zoning for their long-term operations or even simply adding a gate, a little more fencing, lighting, and 20-30 storage sheds/containers that could be rented out for $200+/mo each.
That concludes the basic details of the deal I am working on. Anything blatantly wrong/off about it? Would the deal make sense to a seasoned investor? What kind of equity/cashflow split might entice an investor to be interested? Negative criticisms are welcome as well! Thank you so much!
*M1 Zoning info is on pages 52-53 of https://yavapaiaz.gov/Portals/0/OrdinancesRegulations/Ordinance-Planning-Zoning.pdf
@Jared Haxton: First you want to identify who your audience is. My first guess would be a doctor or dentist or lawyer who needs tax write offs. I know, it isn't what you may have thought, but those are the people with the ability to buy who also have the need for tax write offs.
You want to learn how they finance these projects, the tax breaks they use and the professionals who advise them. Most often a CPA will be involved.
Your opening line is something like, are you getting a return on your pension that is making you happy? Most are in the stock market and will say they don't like the volitility. That where you come in. Your response is, "I have something you may be interested in taking a look at, it has cash flow, depreciation, tax write offs, low maintenance.
"Sell the sizzle, not the steak" Elmer W.
@Abhishesh Acharya this is a deal I came across through a friend of the family. My only experience so far in real estate is converting my primary residences into rentals. This is the first commercial deal I have examined. Nothing is underwritten. I am about step out and start looking for capital so I can make a valid offer.
Being so new in the arena, I am just taking steps forward and asking all the questions I can to keep pushing ahead! What would be my next step in the process here? Would love to make this deal happen if it pencils for everyone involved! Thank you for the reply!
@Mike Hern thank you for the reply! I will incorporate all of that info! Are there places you like to look for this subset of people or does that type of contact typically come organically from your network? Thanks again!!
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Sounds like a good deal, so are you under contract at $2m? You need a good team to handle, leasing, PSA, loan documents, etc.
How much are sponsors (you) putting in as equity? Total equity? Should just be a friends and family thing, 600k? 2-3 investors?
@Jared Haxton one thing that helped me raising money for deals was to sell my team and not focus on myself. I didn’t have much experience when I first began talking with private lenders so I had to show them I had a great team and systems in place so they would be comfortable working with me.
@Ronald Rohde Hey! Thanks for your response. I do not have it under contract yet. I wanted to find some interested capital before making an offer. I do need a team and all the necessary parts to make this deal happen. Do you work on deals in Arizona?
@Jordan Woolf that is great advice! I was figuring I needed to have interested investors before I could engage an attorney about this prospect. Do I have that backwards? What team members do you need in place before looking for capital? What was the order of operations on your first deals? Thanks!
@Sean T. Thank you for the encouragement! I'm just trying to take action and examine deals and push them forward one step at a time! Even if this deal doesn't come to fruition, I am determined to get through the learning curves so I'm better positioned to do the next one!
In my mind, getting the capital together is the biggest obstacle. How did your first deals come together if you don't mind sharing?
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#3 Commercial Real Estate Investing Contributor
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Quote from @Jared Haxton:
@Ronald Rohde Hey! Thanks for your response. I do not have it under contract yet. I wanted to find some interested capital before making an offer. I do need a team and all the necessary parts to make this deal happen. Do you work on deals in Arizona?
Send me an email, i'll shoot you a simple PPT deck 7-8 pages and you can plug in your information. Send that to your family and friends to see if anyone is interested. We do deals in AZ, happy to help!
Quote from @Ronald Rohde:
Quote from @Jared Haxton:
@Ronald Rohde Hey! Thanks for your response. I do not have it under contract yet. I wanted to find some interested capital before making an offer. I do need a team and all the necessary parts to make this deal happen. Do you work on deals in Arizona?
Send me an email, i'll shoot you a simple PPT deck 7-8 pages and you can plug in your information. Send that to your family and friends to see if anyone is interested. We do deals in AZ, happy to help!
Ronald, I would be very interested in your PPT deck. Is it possible I could get a copy of it as well?
@Jared Haxton think of it from a lender standpoint. If you were going to lend someone money, what kind of team would you want them to have? I was say a good attorney, agent, property manager, and contractor is a good starting point. It wouldn’t hurt to have 3 or more of each. You don’t need a deal lined up to build relationships with these people.
When I approach a lender I show them what types of deals that I have done, I sell my team and the years experience they have, and I sell my competitive advantages. I.e my rehab costs are typically 40% lower than other investors. I have buyers lined up ready to buy houses on land contract. If rates increase I can pass that on to the end buyer. I sell that security to the lenders/ investors so that they know their capital is safe with me.
@Ronald Rohde Hi I am interested in this deck as well.
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Quote from @Eric Hufham:
Quote from @Ronald Rohde:
Quote from @Jared Haxton:
@Ronald Rohde Hey! Thanks for your response. I do not have it under contract yet. I wanted to find some interested capital before making an offer. I do need a team and all the necessary parts to make this deal happen. Do you work on deals in Arizona?
Send me an email, i'll shoot you a simple PPT deck 7-8 pages and you can plug in your information. Send that to your family and friends to see if anyone is interested. We do deals in AZ, happy to help!
Ronald, I would be very interested in your PPT deck. Is it possible I could get a copy of it as well?
Sure, reach out to me below
@Jared Haxton sounds like you are on the right track. I recently started talking to some investors about raising money for some STRs and I have learned a lot. One big thing was putting myself in their shoes and asking myself the questions that they would ask me. Then setting myself up for success by addressing those concerns on the front end.
@Jared Haxton: If you need another set of hands, I would like to volunteer to help you craft the pitch deck (and gain experience in the process). The deck @Ronald uses might be a good springboard to get started.
@Jeff Costa thanks for the reply! I will dm you shortly!
In my experience, less is more. Showing the main info is great in terms in returns, etc. If investors are interested, they'll reach out and you can discuss in more detail.
Ok. I appreciate the input. Thanks!
Did you decide to NOT go into details about your and your GP Team's experience in similar deals (???)
ie, Our past projects, Project X, came in at $X million, Project Y, came in at $Y million, Project Z cam in at $XYZ million. etc...
The GP side must have some depth of experience even if you are new at it (???)
Do you have the human commitments for the GP side you will need lined up yet (if needed, ie. co-signers, net worth person, asset type and size owner, etc...) (???), or will the lender let you swing this deal by yourself (???)
Do you have a lender identified and ready to go, and do you know the lender requirements for the deal, have you factored in the down sliding economy into the lender's future moves (ie, increased down, increased personal net worth required, pledging assets, increased cash holdings required, etc..).
This last thing is probably more of a business planning thing internally, but a potential LP that knows Real Estate might want to know your plans for handling this.
Good Luck!