All Forum Posts by: Danny Simard

For our properties, FM Global does this. They send engineers out once every year or two to assess the risk and provide recommendations. Kim - if you're at that size of portfolio, a bigger insurer might be open to your business. 

You've got to trust that they're not cooking books. If when you're talking to the potential tenant you have suspicion that they're shady, two considerations: 1) pass on that tenant; or absent that, 2) get audit language put into the lease by your attorney drawing up the lease. Audits required every 12 months, costs paid by TT.

Also, +1 to Evan's comment. We have plenty of tenants that aren't sophisticated so they don't do the lease-required HVAC maintenance, etc. In this scenario, you'd be better off doing it as LL and charging a higher base rent. 

Scenario: I'm an investor looking to borrow from a private money lender. I've found that private money lender, we've agreed on high-level terms, and we're ready to move forward. Now what? What do we have to do to get ourselves formally engaged? Lender isn't going to just write a check or wire funds directly to the individual. 

Does the investor create a business entity, then contact a loan servicer to essentially broker the administrative part of it? Instead, does the investor create a business entity, then have an attorney draft loan docs? 

I'd love to hear from those who have done this. Thanks!

EDIT: After posting, this post was suggested, and it answers the question quite well: https://www.biggerpockets.com/...

I'll leave this here for reference. If anyone else has additional points of advice, I'm all ears. 

 Sounds like you found a solution. From the operations side, I really don't like the airCRE leases and I would have recommended just hiring an attorney to draft up all the docs you need. That way, you can set it up from scratch with all the terms you want and can negotiate from there. 

+1 to Kastle Systems if you're willing to pay for the comprehensive system. There are competitors out there, too. But, sounds like for smaller scale, go with the cheaper Schlage option. 

Loving this discussion! I can answer a few pieces of this. 

"For property management cost would this typically be taken into consideration for the NOI?" - yes, both in theory and in execution. I'll admit I'm not so sure on a very small deal like this, but at the institutional level, commercial tenants all pay their pro rata share of operating expenses (OpEx) (also called CAMs), and that usually includes paying for engineering and property management, among other things. On a small deal like this, it might just come in the form of a management fee calculated from gross rents or NOI.

"With being in a historic district would you have to consider higher maintenance cost for major CapEx expenses?" - it completely depends on what the city requires when you do work on historic buildings. You're going to want to talk to a savvy general contractor that operates in that city to find out what it's like. 

"What are the factors or calculations do I need to consider when underwriting a deal to decide if the property is a fair value and worth pursuing." - I think the biggest thing you're going to want to do is get a good estimate of how much capital expenditure (CapEx) you're going to want to spend to improve the property. It might not be right away since it's leased up, but once you get a vacancy or two, you're likely going to need to spend capital to get it competitive to achieve market rents.

Also, ProTip: If you're local, walk into the businesses and get a feel for how things are going. For example, if it's a coffee shop, buy a coffee, leave a nice tip, and ask the employees how business is going and how they like their job and the community. You're almost certainly going to learn something valuable that you won't get from the broker, the seller, or any docs you review. 

I'm not a lender or a dealmaker in this space, but I'll echo that I think you'll probably want to get to 40% down or more.

Lastly, also if you're local, drive around this part of town and look for the "Professionally Managed By" and "For Lease" signs for similar properties. Contact those property managers and brokers and ask them how the market is going. You might connect with a broker/PM with great rapport that you might want to hire on as PM. 

Great reply by @Ronald Rohde. Will just add that after the due diligence period, you then go "non-refundable" with respect to the deposit and you then go through the normal-ish escrow process you'd be familiar with in other asset classes. 

Good luck!

I don't know that market, but I suspect you'll have to specify what asset class you're looking at. Cap rates probably vary between: 

- multifamily

- industrial

- retail

- office

- mixed use

- other/specialty

What asset class are you interested in?

I'm also curious to know what you find out. I live in Tijuana and haven't seen anyone using digital signatures yet. That's not to say nobody uses them, but I haven't seen it in my limited experience. 

Related, if you have details on your lot, please share them. I'm looking to buy in Baja California within the next year or so. 

My partners and I just got our first buy and hold SFR in Georgia. We asked our property manager if we could use their business address (and their PM business entity) as our registered agent, they said yes. If you use property management (I assume you would if you're out of state and you own rentals), ask your PM!