Seattle Investor, long time BP listener, new to site
Flipper/Rehabber · Sammamish, WA · Member since 2016 · 57 posts · 14 votes
Seattle Investor, long time BP listener, new to site
Most Popular Reply
San Francisco, CA · Member since 2015 · 786 posts · 717 votes
10yWelcome to BP. It seems like a bad time to start in commercial real estate. All of the smart commercial investors I know have been sitting on the sidelines waiting for the market to crash or correct.
GC is a great background. It is virtually suicidal for a good GC to work with investors on residential flips. Most of the experienced rehabbers I know are paying $75 per sq ft on a "gut out" and $35 per sq ft for a cosmetic rehab. It was only 4 years ago where I remember paying $35 per sq ft for a gut out and $12 per sq ft on a cosmetic.
There are no good GC for investors because investors want to pay half price of what it costs to run the construction. So all the good GC stay away from investors that want to underpay.
Investors generally want to pay for direct labor and direct materials and not pay for the contractor risk (OSHA, aebestos, LNI, litigation, construction defect risk management, lead based paint, surprises, injuries, etc.)
Seems like most investors want to overpay for a deal and then blame the contractor for their woes.
All this being said, on rehab projects I moved to hiring GC and let them underbid their risk management. I find it is way cheaper than being my own GC and subcontracting. I would rather pay top dollar and let the GC take all the risk and have the attorneys keep them in check for timelines with contract documents.
10 Replies
- Audio Engineer and Investor · Cebu City, Cebu · Member since 2013 · 7k+ posts · 881 votes10y
Hey @Jeremy Benezra, welcome to the site! Feel free to jump in the community here and also take advantage of the treasure of knowledge here.
- Developer · Sammamish, WA · Member since 2016 · 24 posts · 6 votes10y
Hey @Jeremy Benezra!
Welcome.
We have similar backgrounds leading us to REI in terms of construction and commercial real estate.
Out of curiosity - are you looking more for strip mall type properties or mid rise properties?
- Flipper/Rehabber · Sammamish, WA · Member since 2016 · 57 posts · 14 votes10y
Hi @Jessica S.
I think a strip mall would be the logical next step. Maybe 5 or so units/places of business, a 1 story concrete block structure, should make maintenance cheaper and easier.
Back when my main gig was construction, I did a lot of Tenant Improvement (TI) work in structures like these. Also, I still help a family friend manage and maintain his larger strip mall in Kent.
A mid rise might bring a lot of complications I don't know if I want yet. Possibly the need for a property manager, HOA...the headaches would be larger. One day, but for now I think a strip mall would be perfect. Thanks for asking. How about you?
- Developer · Sammamish, WA · Member since 2016 · 24 posts · 6 votes10y
Currently constructing first SFR ground up 4200 sqft on Eastside set to go on sale in 3-4 weeks.
Will consider commercial in 2-4 years.
In the meantime, I have been perusing the retail market and learning about cash flows from the owner perspective. I have been looking at the commercial MLS as well as costar and loopnet.
Also I'm a member of an organization called BOMA - Buildings Owner Management Association.
They have several building owners and have a very active community. I'm a keen believer of being the average of the people you associate with and from a REI perspective, BOMA is great if you want to meet some folks that own everything from strip malls to down high rises!
- Seattle, WA · Member since 2015 · 500 posts · 243 votes10y
Hey @Jeremy Benezra - welcome to the site. When you say commercial properties, does that refer to commercial multifamily, or commercial retail, industrial?
You might want to look into attending one of local meet-ups that @Troy Fisher, @Kelsy Soderlund, or @Tiffany Plovie run. Informal affairs to network and try to find resources for your next project.
- Flipper/Rehabber · Sammamish, WA · Member since 2016 · 57 posts · 14 votes10y
I wouldn't want to jump right into a 50+ unit multifamily. I was thinking either something smaller like a strip mall of retail or maybe a small mixed use. While driving to a project in Auburn I saw a property that was 5 retail locations on bottom and 5 apartments on top. Something like that would be great.
I'm so slammed right now, trying to get a house on the market, close a house... When things settle down I will def hit a local networking meeting.
- Inspector · Worcester, MA · Member since 2013 · 85 posts · 39 votes10y
Hi @Jeremy Benezra! Are you still working as a GC? There's a quite a few folks in our group that are really in need of some quality contractors! There's also a few commercial investors and lenders in our group who would be interested in working with you throughout the process of finding and acquiring a commercial deal of any size.
Once you have some time freed up, we'd love it if you could make it to our meetups! You can join our meetup page to stay up to date on our events and schedule here: http://www.meetup.com/PacificNWRealEstate/
Hope to see you around soon!
@Alex Chin Thanks for the mention! We're always looking to create new opportunities and foster great relationships! - Flipper/Rehabber · Sammamish, WA · Member since 2016 · 57 posts · 14 votes10y
@Kelsy Soderlund I do work as a GC but its only the rare project I take on. I have a couple commercial property owners I've done tons of work for over the years. Most of those projects are fairly easy, heavy on subcontractors. I wouldn't take on a residential remodel for a customer anymore - it takes too much time to get all the details perfect and I usually have a couple residential remodels of my own going at any one time. If a commercial property owner wanted a bid on some work near me, I would consider that though.
I turn down a couple projects a week from people who call me out of the blue based on my yelp profile or other listing out there. Its nice to say that unlike a handful of years ago, I'm way too busy to go out and bid a random person's job that didn't come to me from a referral and I have no relation to. Then there's competitive bidding with who knows how many other contractors. If the customer is only looking for the lowest number, I'm again happy to say that unlike a handful of years ago, I'm not going to be that guy. My level of quality is high, I stand behind my work, I've been in business over 8 years, its easy to get ahold of me, I'm not going anywhere...
That being said, if someone in my area needs a referral of a subcontractor or electrician, plumber, hvac guy...I'd be happy to help if I can.
- 10yJulie MarquezPro MemberInvestor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
@Jeremy Benezra Hello and welcome to Bigger Pockets. I think you will love this community. I'm also a CM grad from UW, and right now I work for a local GC on a school project in Anacortes. I am continuing my rental portfolio in Skagit and am scared to get my feet wet in a residential flip, though I've done plenty of commercial TIs in the past. You've got a great start, a great background, and some great goals. Glad to connect with more local folks!
- San Francisco, CA · Member since 2015 · 786 posts · 717 votes10y
Welcome to BP. It seems like a bad time to start in commercial real estate. All of the smart commercial investors I know have been sitting on the sidelines waiting for the market to crash or correct.
GC is a great background. It is virtually suicidal for a good GC to work with investors on residential flips. Most of the experienced rehabbers I know are paying $75 per sq ft on a "gut out" and $35 per sq ft for a cosmetic rehab. It was only 4 years ago where I remember paying $35 per sq ft for a gut out and $12 per sq ft on a cosmetic.
There are no good GC for investors because investors want to pay half price of what it costs to run the construction. So all the good GC stay away from investors that want to underpay.
Investors generally want to pay for direct labor and direct materials and not pay for the contractor risk (OSHA, aebestos, LNI, litigation, construction defect risk management, lead based paint, surprises, injuries, etc.)
Seems like most investors want to overpay for a deal and then blame the contractor for their woes.
All this being said, on rehab projects I moved to hiring GC and let them underbid their risk management. I find it is way cheaper than being my own GC and subcontracting. I would rather pay top dollar and let the GC take all the risk and have the attorneys keep them in check for timelines with contract documents.
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