Abundance of empty commercial RE- how to benefit from it ?

Question

There are innumerable empty commercial properties of every kind in Los Angeles .

How can I take advantage of the existing situation not having much money to invest?

An answer from someone who had experienced such a situation some years ago and was able to make money would be certainly most appreciated

Christian Decker · Answer

Hi John

I am a commercial landlord and broker in Seattle Wa. What I do is I have a partner who has cash and is willing to invest it. I then purchase (with the partner) the empty commercial space at a discount, release the space and do any needed capital projects needed, then refinance. We are set to refinance a project here soon that we purchased all cash and it looks like we will be able to pull out all the money that has been put in (including a new elevator installation). Then we will do it again.

The beauty of commercial is that you can get non-recourse loans. So, for the property I just mentioned, we will get an infinite cash on cash return with no risk as we are not personally liable for the loan. This process has taken almost a year and a half to do though.

Best of luck! Shoot me a dm if you want additional deals or have other questions.

Thanks

Christian

Steven Nguyen · Answer

What are the pros/cons of Retail vs Office?  In Orange County, CA, office seems to have better CAP rates compared to retail.  Has COVID impacted either retail or office?

Steven Nguyen · Answer

What type of commercial RE do you focus on?

Steven Nguyen · Answer

Thank you for asking this question!  I've been mass messaging Loopnet listing agents all over CA asking if the sellers would be open to carrying 25% if I down 10% (using a HELOC to finance 10% down) and mortgage 65%.  I've been targeting retail strips, banks, and office space, but have had not much luck or the cashflow would be negative.

John S. · Answer

Thank you Christian, I have to digest well what you have written and an extra thanks for offering to answer more questions.

Christian Decker · Answer

@Matthew Leal

On the retail side I would say no. While there are a significant increase in vacancies, 2nd or later generations of retail space has had fairly good absorption.

Office in the downtown or near downtown has had some struggles. But suburban office has been leasing up fairly well. ￼

Matthew Leal · Answer

@Christian Decker I am curious, are you finding it difficult to re-lease these spaces?

Christian Decker · Answer

@Steven Nguyen

In Seattle, we have not actually seen much of an effect on cap rates. Buyers want a "Covid Discount" but Sellers have held strong and are quite often getting close to, if not at, their asking rate. For retail and office we are seeing around the 5% to 6% Cap rates, depending on lease terms, location and size.

Christian Decker · Answer

@Steven Nguyen

I personally own and invest in Retail and Office. As a broker I work in Retail and Office leasing, but focus on Retail, Office and Multi-Family sales.

Abundance of empty commercial RE- how to benefit from it ?

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