All Forum Posts by: Christian Decker

A credit tenant has a high credit rating. Having a high credit tenant can actually help you get better rates with lenders as well!

Investment Info:

Office Space commercial investment investment in Everett.

Purchase price: $2,500,000
Cash invested: $500,000

Invested with partner 50/50. Building was 70% vacant by the end of 2019. Spent 2020-2022 releasing and capital improvements.
Fully leased, brought cash flow up, value is now over $5,000,000. Fully stabilized and solid investment with long term tenants. .

What made you interested in investing in this type of deal?

Value add property in Commercial.

How did you find this deal and how did you negotiate it?

On market deal.

How did you add value to the deal?

Re-leased majority of tenants

What was the outcome?

Fully leased, anchored by Providence

Lessons learned? Challenges?

Medical Dental buildings take longer than traditional retail. Budget for more time than expected.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I was the agent that did the leasing.

This is a wonderful question! Personally I love NNN buildings (not absolute NNN) I own 3 NNN buildings (2 retail, 1 office) and a gross office building. Your question has multiple layers but I'm going to focus my response on 2 of those, first is multi-family vs commercial, and second is NNN, Absolute NNN and gross rent structures.

1) Commercial vs Multi-Family. Personally I love Commercial (Retail, Office or Industrial) over Multi-Family for a lifestyle advantage. With commercial you typically have less tenants than a multi-family building of comparable value. This means less headaches (for me). Second reason I prefer commercial is that you are dealing with businesses instead of residences. There is more professionalism in commercial and very rarely are there problems that come up after working hours. This allows me to have a better separation of work and home life. Finally, Commercial traditionally has longer lease terms (5-10 years in my market) instead of the 1-2 of multi-family. This provides security and even though there is risk in the longer down time to release, I just budget that in. 

2) NNN, Absolute NNN and Gross Rent Structures. You say in your post that NNN gets lower cash flow, I am assuming this is an Absolute NNN building. Personally I do not like the returns on Absolute NNN's. I prefer NNN buildings for many reasons. First, a majority of our buildings have property management built into the NNN cost, so that does not come out of my pocket. Second, The tenant covers all the expenses of the building, so if insurance or property taxes spike, the tenant covers that instead of us. With a Gross lease, you have to bite that expense and the property manager expense. So, I feel like I personally get the best return on NNN buildings even though they require a bit more accounting. Personally, the decreased return of an Absolute NNN building does not add the value of not having to manage it because I know by having a manager or self managing I can get a better return on the same building.

Naturally, these are my opinions. I'm happy to discuss these further if you would like! I like buying gross buildings that are poorly managed, cutting costs and then releasing as NNN. Good Luck!

@Patrick Flanagan

Thanks for the review!

Hey Dan!

That's exciting to start on the commercial side! I am also a part of this group (But don't attend regularly unfortunately due to the time zone difference). It is a great group and there is a lot of experience, especially in the industrial sector.

Unfortunately there are not a lot of books or resources for the commercial realm. I would recommend talking with a local commercial leasing agent because they will be a must for your team. they can help you walk through some of the parts. Another thought would be to talk to a commercial property manager, especially if you are wanting to run the building as a NNN building instead of Gross.

If you have any specific questions feel free to message me! I am a landlord of retail and office so happy to help!

@Patrick Flanagan I am also curious, how has it gone?

Hey Adam!

Rehabbing the facade is a really good idea! Do be careful though and check with your city's zoning and development codes. They can be fairly strict about what can and cannot be there.

Good Luck! Keep us updated on how it goes!

@Krishna Vakk

Hi Krishna.

The answer for this is obviously deal specific and has a lot of moving parts. But generally, you should be able to get financing for the deal. Commercial property has significantly different lending requirements than single family. You will likely need to put more money up front, or go with some kind of bridge loan. I would recommend building a relationship with a local banker (not national) because they will have more flexibility on what they can do.

As I am sure you know, the first one is the hardest but once you have proven experience lending on these types of properties should be no issue.

@Evan Polaski

Hi Evan

I guess that might be market specific, because there are totally buyer reps for all sized buildings, from $500k to $100million+ here in Seattle.

Hi Dominic!

I own 3 NNN Buildings and a gross office building. What are you trying to learn about them?

While YouTube is a great resources, I would encourage you to reach out to a local commercial broker, take them to lunch or coffee, and pick their brain that way. Tell them you are wanting to buy NNN buildings and want as much information as possible, then come prepared with a list of specific questions. Personally I love love love NNN buildings since the tenant pays the Real Estate Taxes, Insurance and Common Area Maintenance (the 3 Nets). It does require a bit more detailed accounting on your side, but the benefits outweigh the difficulties in my opinion.

If you have specific questions feel free to DM me!