All Forum Posts by: William Yeh

As covered, building costs in the Bay right now are out of control. Everything we see hitting the market and all of the cranes in the skyline are deals coming to fruition that were years in the making. I echo your thoughts on the job market slowing down which is pulling down the rental market in the core Bay Area. That said there's still a massive shortage of homes for sale in general in the Bay which may work in your favor. Unless you have a high degree of confidence that the market in your area will look good a few years down the road, this deal may represent a high degree of risk. And good luck on entitlements!

Hi Xavier,

My groups is currently serving as lead investor and developer on a ground up 80-100 bed senior housing deal in the Bay Area, CA.

The type of deal you can negotiate depends on the value you're bringing to the deal. I've seem some deal brokers who've made a small finders fee for connecting an investor to a project sponsor. I've also seen deal makers that 1) find investors, 2) find land and 3) entitle land and get a healthy equity percentage in a deal without contributing any of their own money. It all depends on the relationship you have with the senior living operator and how you negotiate with them based on the value you're bringing to the deal.

If you're finding the property, are you acting as the buyer's broker (assuming you have a license)? That's one way to be compensated for your efforts. If you're bringing investor money to the table, that's yet another service you're providing critical to the deal.

Whether you can have them sign an exclusivity agreement again comes down to a business negotiation. As someone sitting on the other side of the table, I can't image ever signing an exclusivity agreement locking my group in to working with one deal broker. What's far more likely is an a-la-carte arrangement where you'll be able to command some level of equity/compensation for those deals that this senior living operator joins you on.

Another idea is shopping your services with other senior living operators. Bidding and creating competition for your services is always the most powerful force in any business dealing.

Hi Faith.

Alex is spot on. My practice is focused in the East Bay (Alameda, Contra Costa counties) as well as in Solano County which is north of the east bay and about 40 - 60 minutes north east of San Francisco.

Prices are significantly lower in Solano and rents have also increased strongly due to outward pressure from the core Bay Area. Both my group and I have made multiple single family home investments as long term holds and have been able to enjoy strong rent increases as well as appreciation. While out of state investment opportunities may present better cash flow, CA investments tend to offer much stronger appreciation over time so it's really a question of which you prefer. I looked at some turnkey opportunities in Indiana but eventually decided that it's best to invest local where I really have a good handle on the market.

Hope that helps!

@Kevin C. 

My group is also endeavoring to develop a senior housing deal from scratch. Regardless of the type of facility you are contemplating, there are two distinct pieces to the undertaking which you've described. 1) real estate development and 2) business operations.

If you intend to develop a piece of dirt from scratch, get ready for a long and turbulent ride. Development of any kind is fraught with challenges from day 1 ranging from feasibility (which is a big issue and to be addressed early on) to entitlements, financing, construction, and stabilization (roughly in that order). Get cozy with the city's planning department as you'll be working closely with them on entitlements. They need to both 1) like the use being proposed and 2) not deem the use incompatible with their adopted general plan among myriad other issues ranging from environmental to biological, etc. (scared yet?)

As others have already mentioned, senior housing with any level of service offered beyond that of a typical multifamily property is a business, not a turnkey investment. Your feasibility study and nothing else should dictate the programming and level of services offered. If your group has no experience operating such a business, I'd recommend seeking out multiple operators as others have suggested and heavily vet them. How many past projects have they taken part in? Have they only served as an operator or do they do any development work in addition? Do they typically have any skin in the game or only operate on a fee for service basis? Have their past investments met their pro forma expectations? Any pending litigation?

If all that looks good, make sure their interests are aligned with yours, namely with compensation in the form of equity, profit sharing, or some combination thereof. Given your presumed lack of experience in operating a senior care facility, the last thing you want is an operator that sees you as a low hanging contract that they can walk away from with minimal damage.

We're deep in the throes as well so this is merely a primer based on our experiences. Hope that helps.

Hey BP. My group is currently looking to purchase a piece of land for the development of a senior housing community in a suburb outside of the core San Francisco Bay Area (independent + assisted with potential for memory care and SNF down the road).

We've already reached out to the city with regard to the entitlement process and are baking into our LOI that all entitlements must be satisfied in order for the deposit to become nonrefundable. Namely, we've included environmental surveys, build and design permits and CEQA. This is opposed to a fixed timeline for the contingency period.

To those that have been down a similar road, any tips on deal structure, contingencies, timelines, etc? Thanks in advance.

@Jeff Mars Oakland has been on the upswing for years now. At last check it's appreciating faster than SF. That said things are still highly neighborhood specific. East Oakland is still pretty depressed but downtown, Lake Merritt, Rockridge, etc. have gone through the roof and West Oakland is following suit given it's proximity to SF and relatively affordable pricing compared to everything surrounding it.

Hope that helps!

@David Pupo I think this is a perfectly valid question to explore and one that I've thought about as a licensed agent in Bay Area California. This topic was covered in the exam prep material which specifically states that it's illegal to profit from a real estate transaction without being a licensed agent or broker.

That said I'd hazard to guess that there are at least a few wholesalers out there operating without proper licensing. It's a business decision on their part and one that seems unlikely to catch scrutiny unless enough people get ripped off and start making noise.

And yes I spell checked this post (thank goodness!)

Hi Austin. I'm a part time agent and have been doing OK for myself for a few years now. I've tried building my business online with a lead generation website and advertising on craigslist/fb. For me those were complete wastes of time. I would get leads and do showings only to have the prospect buy with someone else. Most prospects were also in poor financial condition.

As soon as I stopped paying for advertising, I started getting leads and closing deals. All of them came from personal referrals of friends, family and coworkers. I got the word out to my network that I was in real estate. When I would hear that someone is moving or thinking of buying a house, I'd ask them if they were working with a Realtor and tell them I'd be happy to help if they need it. 

The bottom line is people in your network will trust you more than they will a random agent that they meet online. Respect that trust, give them the most prompt service they've ever gotten (respond within minutes not hours), get them a nice closing gift, and you'll be on your way to building your referral network.

As for marketing, I'd rather spend my marketing dollars treating my clients well that close with me than on client acquisition as I find it makes a stronger impact on generating new business.

That of course is just what ended up working for me. Some agents work the cold market exclusively with great success. Find what works for your and only focus on that approach.

Cheers and best of luck.

Hey BP,

I'm considering investing with a group that does flips and they provide a corporate guarantee backed by both their liquid and non liquid assets on all investor funds that they accept.

While I have some familiarity with personal guarantees on loans received from banks, I've never dealt with a guarantee from the other side of the table. Does anyone have experience in having an investment guaranteed and the enforceability of such a guarantee? If the catastrophic happened, what's stopping the group from liquidating everything and closing up shop?

Thanks in advance.

Hey BP,

I'm considering investing with a group that does flips and they provide a corporate guarantee backed by both their liquid and non liquid assets on all investor funds that they accept.

While I have some familiarity with personal guarantees on loans received from banks, I've never dealt with a guarantee from the other side of the table. Does anyone have experience in having an investment guaranteed and the enforceability of such a guarantee? If the catastrophic happened, what's stopping the group from liquidating everything and closing up shop?

Thanks in advance.