All Forum Posts by: Ethan Bruland

I am looking at a commercial property for redevelopment.  It's currently zoned commercial and in a high traffic area.  My thoughts are a fast food restaurant with a small apartment building on the other side.  My concern is that it's lot line is an active railroad track.  It's not a high use track, but is used.  Would this hurt my opportunity to rezone? Or any other issues from a construction standpoint?  Thanks!

I would not suggest taking on 8% debt to act as an emergency fund.  If I could go back to 28 and no kids, I'd be buying a new house every 2 years and renting each as you move on.  I love living in a small town, but it's one of the biggest downsides from a house hack standpoint.  Keep moving until you find your forever home.  Each house in between is a step towards financial freedom.  Good luck!

Quote from @Ernst S Coriolan:

If you don't have the time to manage the property how would you start a property management company? It would take a lot more time to create the company you want, especially if the other PM's are falling short of the standards you are looking for. Do you have a 9-5 job taking up the bulk of your time or where's your time going? I believe this is doable but it would take time and with that large of a deal already in the works I just don't think you could do it in the manner you are hoping for. 

Great question. And one I expected. My thought is that a PM is needed in the area. And under a blanket model/company I could hire someone to manage it. I’m not afraid to start it. I know I can’t manage it. Similar to knowing I can’t self manage. Yes, I’ve got a 9-5 that I cannot take time away from long term. 

I’ve self managed our portfolio the last decade. Looking at a property that would 8 times our current # of doors. Management is going to be near a full time job. I cannot dedicate that much time. There’s zero quality PMs in our area. Is it worth looking at starting one? Or am I over my head. 

Hey David, I've also started investing in out of State real estate.  I live in Nebraska and values are outside of what I'm looking at for returns.  I'd start with property managers instead of the specific property.  If you buy a property but can't find a pm you're comfortable with, it's going to cause you issues in the long term.  Also, a lot of the property managers naturally have connections that you do not.  Good luck in your search!

Originally posted by @Bennet Sebastian:

Hi @Ethan Bruland, a 15-year lease back plus options, at 7% cap and with a strong company sounds like a no brainer. But often times when deals are this good the lease rate is artificially inflated to get a higher sale price. Are the owners willing to give you a personal guarantee? Tell us more about the property, (type, age, size, price).  What is the going cost/sf for comparable properties in the market? What you don't want is a property that will be worth substantially less than you paid for it when your tenant leaves. 

 The company is stable.  What would a personal guarantee look like?  The building is 41,000 sq feet.  New roof and insulation within the last 2 years.  The ask is well below the replacement cost.  I'm a younger investor at age 32, so this is appealing long term, but my biggest fear is it ever sitting empty in my lifetime.  Also ties up a lot of capital today. 

I'm looking at an absolute net leaseback with what appears to be a thriving industrial company. Financials show consistent growth in revenue over the years. It's a 15 year lease back with 3 different options for additional 5 year terms after. Annual rent escalates at 2%/year. It's a huge investment compared to my SFR portfolio but at a 7% cap, it shows great returns down the road and would pretty much set us up for life after retirement. I have zero experience with NNN investments so would love any guidance or potential red flags to look for.

Ethan 

Originally posted by @Scott Scharl:

@William M. -- I have a good friend who is a NNN investor. Would love to connect the two of you, if you're interested. Could you send me a private message? Thanks.

Hey Scott, I'm looking at a true NNN deal and am very green on the subject. Is your friend still in the business? Thanks!

Thanks Greg! Never looked at it that way. I am 95% looking at SFR. 

Originally posted by @Greg Scott:

If you are looking at single family, duplexes, triplexes, quads, Cap Rate is a completely irrelevant metric.   The appraised value on those properties is based on Comparative Market Analysis (Comps) which has ZERO to do with Cap Rate.

On commercial properties, including apartments, appraised value is determined using the income approach.  The income divided by the Cap Rate determines value.  In that sense, Cap Rate is a critical component that you must know.

I have no idea why BP puts Cap Rate into its calculators for single family.  To me it seems like a rookie mistake.

I’ve analyzed a lot of deals and seems like I’m hot and cold on cap rate. Used it frequently once I found out what it meant. Then it faded into the dust. I focus more on cash flow or the gross cap. What multipliers are good ones? A lot of analysis paralysis in this market as deals are harder to find. 

It feels like I’ll find what I think is a good investment then do too much analysis and look at the cap rate and it puts doubt into my mind. Find the cash flow and run with it?! 

I forgot how much I love this website. Blessings to all of you!

Ethan