All Forum Posts by: Chris W.

Quote from @Arun Philip:

Hi everyone,

Am looking on the BP community to find a CRE mentor! I could spend all my time reading and learning but I am visual learner and want to be able to learn funding, financing, analyzing, and owning commercial properties from an investor themselves. Overall the ins & outs of CRE. Might be a stretch but wondering if there are any investors who would be willing teach someone like me or where in the area I can find and connect with investors to learn from?

If you read and learn, you should be able to do also. What does that mean? Take some of the early steps like financing and actually put statements together, pay, current investments, Balance sheets, etc. into a file. You'll build on this because you're going to miss things the bank/lender will ask for.

Pick a property type and go through CREXi/Loopnet or with a broker and run your own calculations on available data for CAP to get an idea, not a guarantee. Be imaginative here, but funnel it down to listings of interest.

Formulate a sound plan and put it to paper/word/pdf/excel unless you can pitch a banker "from the hip". Write it down.

Identify players such as your lawyer, inspector, permitting department from the city, property management, leasing agent, etc. or come up with a plan to do these things yourself (except lawyer). Write them down, and maybe contact them if you're far along.

Read the city's vision plan to see where the money is going and see if your asset class is in or near those areas. Look for trends in development also.

Satellite data, drive through, stats on the area, etc....read/look at them!

I had 0 CRE experience when I bought my building. My due diligence was EXTENSIVE enough that the sellers 40+ year CRE broker complimented me on one of the best due diligences he had seen. I really applied a lot of previous residential experience and things I had read here to buying that property. Plus a 1031 exchange.

It's like buying residential, but with some differences. This is just my opinion though. Everyone has their own take, sometimes you have to take the pieces and make your own pie. What I was able to make work for me, may not work well elsewhere also.

I see you're a realtor, does your brokerage have a CRE side?

I would bet that your knowledge exceeds mine since you're a realtor. You've got this!

I don't post here often, but I do like what Henry Clark had to say earlier about choosing properties that have been on the market for a LONG time.

I used that strategy for a 1031 exchange from a small condo to a 6ish thousand square foot commercial office building (no experience). The property had been on the market for 3 years, but was located in a downtown historic district. The owner REALLY wanted to sell because they were retiring, so I drove an aggressive bargain.

2.5 years later a $15 million dollar redevelopment project straight across the street is starting to lease apartments and some 1st floor commercial spaces. My due diligence was EXTENSIVE because I was a newbie. I knew it was only a matter of time for that property to be redeveloped and also where the city itself was focusing their efforts (which my property is on that main street).

Never read a book about it....but that doesn't mean you shouldn't learn or read up before you commit serious funds in the commercial space. In my opinion it has similarities to residential, but also a different monster as the other posters have said. It can move like molasses too, so your asset may take time to sell if you choose to exit.

All this said, and I don't have a single income producing residential property at the moment....something I'm working to rectify.

Quote from @Dylan Thomas:

@Chris W. Would your opinion on not purchasing an office building change based on the deal or say if there was a single tenant building where the tenant had 15 years remaining? If so, how good would the deal have to be to grab your interest?

@Chris Seveney As a lender, I imagine you would be more hesitant to lend on an office building vs multi family at the moment. How good of a deal would someone have to bring you in order for it to make sense from your perspective?

@John McKee How are your current buildings performing?  

@Dylan Thomas

My due diligence would be extensive now. I do intend to buy mixed-use with above 50% comprised of residential rental units. Downtown/CBD are the most interesting for me. 15 years remaining doesn't mean they can't go bankrupt....or anyone for that matter. I'd focus on corporate clients who have solid financials if I were to entertain a larger office building. I am currently looking for deals that allow room for apartments on the upper floors and office or other use on the 1st, maybe 2nd floors.

From a current office building owner in the Hampton Roads Virginia market.

Currently I feel blessed that I am leased at 75%. I most certainly am not pursuing any more office space. Mixed-use and multi-family are the next moves. If I were to go after any more office space, it would be to convert it to mixed-use. This could be the next big "play" with the shift in the market.

I feel I've been lucky with the property I purchased. I've seen a rather appreciable price hike, but I'm in a downtown area/CBD. The deals I think are yet to come. But lenders are not wanting to lend very readily on equity as I am learning (and recently posted about). I can only imagine what it's like for anyone wanting to buy right now.

One tenant takes the first floor of my property, with the next floor being comprised of individual suites and overlapping leases. Some of my tenants are expanding into the vacant suites, which I am thankful for!

An exceptionally well executed due diligence period on the property should be conducted. Something with income in place and a long term lease with a 30% or more down payment might get a lenders attention? Seems that their scrutinizing deals heavily right now.

Judging by the limited response here and by brokers/lenders.....I'm seeing my equity position look like nothing more than a cool appraisal and a sweet story.

Quote from @Erik Estrada:

What's the current LTV on your 1st? You can do seconds with a hard money loan as long as the CLTV is not over 65%. What is the exit strategy?

LTV is at about 26%. It’s purely a commercial office building. All the lenders I’m speaking with are avoiding office buildings…even hard money. 

I'm retaining this property long term. The 7 story building directly across from me is undergoing a MAJOR renovation now. That will be another equity bump. I’m in a downtown area.

Quote from @Chris Seveney:

@Chris W.

Do you have any other assets you can secure it against?

What’s the value of the asset, and what’s the amount of the first lien?

I have just my primary residence I purchased early 2022, but even at 90% LTV paying points the HELOC would not give me much, or are you saying also have another loan secured on my primary?

$680,000 value and $175,000 owed. I bought it for $375,000 late October of 2021. I’d say that’s a decent ROI 👌. The appraisal left more than a few people including me speechless.

BP gurus,

I am searching for financing options currently for a lender that will do a second position loan on a well leased office building in the Hampton Roads area. I would VERY much prefer to not refinance out of my 1st position commercial loan as the rate is well below residential loan rates.

I've spoken to numerous lenders in the area and out of the area and they are very averse to 2nd position on office buildings. The building is leased well at about 75%, lots of equity, excellent location in a downtown area, major larger building being rehabbed directly across the street, recent appraisal has my equity position at just over $500k in equity.

Any recommendations, advice, or know a lender that is currently servicing these loans? I know it's tricky currently...I get that. Definitely must tip my hat to some of the brokers in the area I've spoken to. They've reached far and wide with some action, but nothing solid.

I don't mind a bridge loan, even with the interest rates the way they are.

Thank you in advance for for any information! 

Quote from @Andrew Valdez:

Quote from @Henry Clark:

@Andrew Valdez  Unfortunately, I haven't read a book on Real Estate.  Did the worst thing possible and learn by mistakes.  Without going into my professional background, I followed the below.

Start small and Make Your Big Mistakes Early.

I always say use your strengths or look for nasty properties.

You're in Norfolk, VA. Please spend a weekend, building a Business model around BAH (Base Allowance Housing). Several models or lines of business. This applies to both Military and Civil services in some instances. Make several models then reach out to me. I don't want to lead your thinking. Your Business should Blow up, no matter what the economy.

 I will look into this. While I dont like making mistakes its the only way to learn. I have been using this approach myself but its slow and grinding and leaves a lot of risk on the table. I found this book called "Real Estate Development Workbook and Manual" By Howard A Zuckerman & George D Blevins its a like 700+ pg book and the book was printed in the 90's and fundamental literature seems to be on par with lots of things but un experienced person like myself I dont know whats old school and new school. 

Thanks for the reply!

 I 1031 exchanged from a small Hawaii condo into a 6k sq. ft. office building in Olde Towne Portsmouth, Va. Dave Foster from 1031 ERG on here was instrumental, as was my lawyer Jeff Tinkham in downtown Norfolk. I have 0 previous commercial experience and did a ton of reading prior to purchasing the building. Once I had it under contract, I used nearly my entire 180 day period of my 1031 to conduct EXTENSIVE due diligence. Was complimented on how well executed it was by the sellers agent. Purchased the property for around $400k on a 15 year commercial note at 4% interest in October of last year. Most of what I learned prior to purchase, was learned here. I also suggest familiarizing yourself with the VODI. It can give you some insight in office space demand (if that's what you're going for). I use pro management and leasing on my property also.....pretty sure some sleuth on here will context clue their way to my listing lol.

Someone on here told me I should wait since I had no experience....screw that. It's paying off unusually well now. Sometimes you have to be willing to shoulder the risk and learn the hard way. Certain opportunities do not always come your way.

Henry Clark's BAH advice is EXCELLENT!!!!!!!! I'm retired military, and may soon also be Federal. I used my BAH relatively wisely and it ultimately landed my building.

And this is why I chose to work with you while we both burn the midnight oil! Cheers!