All Forum Posts by: Brett Peters

@Christopher Canzoneri According to the information provided you are in good shape. The only comment I would make is to try to bring the property to full occupancy prior to refinancing. Also, if you plan to continue using this strategy you should avoid accepting a 'partially amortized' loan. The lower periodic payments are nice but a drawback is that the balance of the loan declines more slowly. In other words, you could risk being able to favorably refinance or sell the  next property at the end of the loan term because of the large outstanding balance.

@Raymond Hooks This is a great question. I specialize in the commercial/retail sector. Dollar stores have very strong financials and are a provider of consumer staples. A well placed dollar store is literally one of the safest retail investments period and notoriously more resistant against economic decline. The discussion over the 'death' of retail is a lengthy one. E-commerce currently makes up about 17% of retail purchases. To add, there is a positive correlation between a customer visiting a brick and mortar and being significantly more likely to make an online purchase. Furthermore, most of the demise these big named retailers have been facing has more to do with poor financial and over-leveraging than it has to do with retail as a whole. However, the logistics of this are just as important as the underlying financial. If you are working with a broker, request a gap analysis, traffic count, tapestry etc. If is not single tenant net, then you will want to analyze the sounding businesses and the overall health of the shopping center itself.

@Pasquale Zingarella I am a commercial broker from the PA area, but as a member of the CCIM institute, I would highly recommend you going onto CCIM.com and you can search for a broker in your area. It will give you a complete list of the top professionals in your area and you can conduct due diligence and personality fit from there.

@Nick Runske, Congratulations on the flip! I am located in Lancaster, so we are very close.

   @Brian M Sweeney  I am in the commercial/industrial space in PA. The industrial sector, specifically warehouse has been on the rise for a number of year with cap rates starting to compress. This is mostly due to the rise in e-commerce and hence the need for warehouse and distribution centers. To add, there is some evolutionary trends being forged by Amazon such as "nano" warehousing that is creating demand for new space. However, post Covid-19, the spike in industrial is due to the increase in the consumption of consumer staples, and in truth industrial is suffering a two-pronged situation similar to Retail. In my area, there are many Industrial tenants seeking lease restructure. This is the contrast between the 30,000 foot view of the sector. As for a short story, a team of five brokers that I know personally just closed on a 132,000 sf warehouse in Denver, PA... (during the pandemic)

@Oleg Enik. It it my pleasure! You are correct in your assessment on the different views on cap rate. Essentially, you can choose between the trailing 12, trailing quarter, current quarter, or projected 12. All of these will have different cap rates. The acquisition cap rate is whatever cap rate the seller purchases, and it could be any of them in truth. I personally always steer the conversation more towards IRR and NPV because they are not as easily manipulated. But, knowing how to rearrange the cap rate can give you power for good or evil... I say that humorously of course. As for approaching us, the best of us are more than willing to help. But you will have to be direct, and do not drag on and take to much of their time. Get the info you need, and keep it moving. Send a thank you card or a gift card as a follow up. I don't know how close you are to purchasing but you should express to them the potential of you purchasing in the future. Keep it professional and you will do fine!

Your net worth does not have to be the same or even remotely close to the value of the property. Loans are based upon LTV and DSCR- meaning the NOI has to be 1.25 times you payment. (DSCR varies), whichever is lower. If the rest of your financials are strong you should have no problem getting a loan with that much equity.

Red Rabbit is the only one I can vouch for!

If you want to go FHA, then yes you would have to occupy one of the units. You can go FHA on a mixed use property as well but you may have to argue highest and best use and seek a variance in zoning. In general anything 5 units and up is commercial.

Hi Oleg, I specialize in commercial real estate and investment sales. You have some very good questions, and I will try to give you the best perspective I can in this short message. Firstly, when you say income capitalization analysis, I am assuming you mean cap rate, which represents the acquisition year NOI. If you mean the projected rate of return, then that is IRR. Anyways, the only way to find the actual total NOI for a specific property is by getting the rent roll from the landlord. Every property is different and that is what cap rate is for. For example, a retail shopping center can have various forms of income, base rent, percentage rent, etc. The increases of which, are dependent upon the exact clauses in the leases among numerous tenants. There is no way to just assume an average NOI. OE on the other hand is much easier to get rules of thumb. Property management and utility companies have this....but. It is dependent on the property type. The OE for an apartment building is much different from an Office building. Choosing an appropriate cap rate is very much a market analysis, and only one piece to the puzzle. Cap rate is a very fickle metric and depends heavily on the portion of NOI that you are calculating. To add, there are many different types of cap rate. My best advice, if you are doing this for investment purposes, align yourself with a "commercial" broker in your area. We live for the heavy lifting in these matters. While it is important to understand them in general, it is a very deep ocean to swim in and the juice may not be worth the squeeze!