All Forum Posts by: Gabriel Graumann

@John McKee having assisted investors find single-tenant, absolute net lease product for years, this story has been experienced by many others for sure. The LL's I've seen come out the best are the ones who have the best leverage and willingness to "fight" (or spend the money to fight) the big brand when necessary. Strong location wins nearly every time, especially in supply constrained markets. A hot corner property with a drive-thru with adjacent huge traffic counts doesn't sit empty. When a tenant goes dark, the space easily fills. Yes, there may be TI's required that weren't counted on, but the strongest locations often are where the fewest TI's (paid by LL) are necessary, or the fewest concessions are given. Big brands want the traffic flow and market share. My experience is that the smaller market towns and non-prime locations are the ones more often that run into the scenario you unfortunately did. I sympathize with you for sure, the scenarios is painful. I would ask though how strong of a location it was for it to stay dark for 1.5 years. Either the market was saturated already, was a smaller market community, or both. I've yet to find a major metro, corner location, with a drive-thru (including covid year), go dark and stay dark for 6+ months.

Not in 20+ years of retail investing. What most often happens is that investors don't like the lower cap rates that prime corners provide, so they stretch their risk parameters to include similar properties but in weaker markets to get them the extra 1-2% increase on the cap rate. The short-term reward of higher cashflow can be negated when the crap hits the fan like you shared, and years of profit are lost. Just a thought from a different perspective. 

@Brandon K. so many thoughts on this one being a retail specialist myself. If you're considering a 4-tenant retail development, I'll assume you've already performed a fair amount of the preliminary due diligence and evaluation such as:

* identified actual demand for the product type in the market you are considering, along with supply in process within competition area to the proposed site.

* understand current market rents for the type of tenant and construction you are considering, and at your specific location.

* understand delivery timelines, TI schedules, and general construction process/permitting for you and the end users.

* have identified the most likely tenants for the development in question, and understand the building criteria each have for spaces.

If you haven't answered "Yes" to each of the above, I would recommend pausing until you have the above nailed down. Not all retail buildings are "build it and they will come" candidates unless they are located in the most prime areas with limited to no competition. This is rare.

The way to find the above, and more specifically to answer your direct question, is to work with a broker versed in the type of product you are looking to develop. They will likely already know who is in the area, who wants to be in the area, and what other projects are in the works and further along than yours which may remove potential tenants from the conversation. They can also assist with general design requirements that various NNN retailers will want to see inside their spaces that, if known in advance, can save tens of thousands in redesign and develop costs.

Good luck and send me a connection request if you want to discuss this more! 

@Konstantin Komkov when you say you have a "commercial property in mind" that you want a valuation on, what exactly do you mean? Are you considering buying it, marketing it for sale, placing debt on it, etc.? You reference Costar directly, but as another member already shared, Costar is simply a data collection tool that commercial re brokers use to evaluate properties for themselves and their clients. They pay hundreds per month for this data (myself included) and they don't typically give out that information for free to a non-client (myself included). If you're evaluating property to invest in, I would recommend finding a quality broker to assist you in evaluating that property, and others, to make sure you have as much assistance as possible related to a large investment. If you're the landlord, same advice. 

Good luck and send me a connection request if you want to discuss this more!

@David Friedman in my experience if the location is strong and you have the property properly listed and marketed, tenants will easily find you. Now if there is a specific brand you want at your property, especially if they are a larger or national credit type tenant, they have real estate brokers and criteria readily available on their website or through Costar that you can reach out to and market your vacancies to. Pretty easy process if you know what they need and you can provide it. Do you research first though, as you can find their criteria and proximity to other stores and competition to vet your space against. If they are already in close proximity with an established presence, there would be little incentive for them to relocate unless your property is a substantial upgrade. I've rarely found this to be the case though, as national brands will seek out those locations in advance and purchase directly for a later sale-leaseback if it's truly a superior to location to one they already have nearby. Good luck and send me a connection request if you want to discuss this more.

@Francisco Perez welcome to the BP community. Happy to connect depending what exactly you are looking to do, and to discuss strategy to get there. I'm a licensed broker myself with NAI in AZ, and I have my own brokerage in WA also. I work with investors nationwide. I'll be in Houston the week of April 14th, and I'm schedule appts now to connect with clients and potential new clients. Good luck on your journey, and send me a connection request if you want to discuss this more.

@Matthew Mendenhall I personally love the approach that @Henry Clark laid out for you. I got my start in commercial real as a commercial property manager 20 years ago for my grandfathers small development business. This provided insights that reading books never did, along with a steady pay check and effectively a paid internship. I got mentorship as a result. Yes, reading is great to learn about specific technics, but hands-on application when running alongside guys that are doing it day in and day out is far superior. If possible, I would recommend finding a position at one of the major commercial brokerages nearby you, or at a boutique if necessary, that does high volume and guys are frequently doing deals. Spend one year doing that and you'll have a wealth of knowledge to apply in your own business. CCIM and SIOR are good options, but they require a level of portfolio requirements to receive the designations that you won't have until you get immersed in the business yourself.

Ultimately, what you need more than knowledge to succeed in this this business, is the willingness to have hundreds of conversations weekly with people you don't already know, and to do that every week for the rest of your career. The larger the database of business owners and investors you make, the better success you will have. Good luck and send me a connection request if you want to discuss this more.

@Bennet Sebastian the concept is still as sound as in years past, even more so now in most major metros as nearly all new development in the warehouse/flex space has catered to larger tenants or single-users of 25K+ SF. A few reasons for this, but the most common is tied to the currently high cost of land and development compared to the rents that can be achieved. This is why many projects are currently on hold unless they have an end-user on contract to lease the space. I watch for these deals in the WA Seattle/Tacoma market and the AZ Phoenix metros, and the same issues exist in both. Florida and Texas are no different, other than slight difference in lease rates. However, construction and material rates are fairly close across the nation.

The only half decent deals I've seen within this sector that make it financially feasible is to find an existing warehouse that could be converted to smaller spaces if possible, which helps cut down on time the property remains unleased. Good luck, and send a connection request if you want to discuss more.

@Brian Baumann as a few have already shared, it depends on what your investment goals are more than anything else. I've done a host of investing myself over my 20 year commercial brokerage career. I have invested in syndication deals, completed fix & flip residential, I currently own one STR in Mesa, AZ, wholesaled residential properties and small residential developments after completing preliminary planning, built a duplex for rent from the ground up, etc. In short, I've invested by a variety methods and each time it was directed by a different goal outcome. I wholesaled deals to get large cash infusions in a short amount of time to fund large buy/hold opportunities, or liquidated because I saw new risk on the horizon that may diminish future returns.

The question I ask on every deal I'm considering, and the funds I have to work with, is: "what do I want my money to do and when do I need it to happen by?"

The answer to this question will direct you as to where to place your money.

Commercial real estate investing is great for the long-term, with plenty of tax benefits of its own. However, liquidation is rarely quick and markets are unique. STR's are a different beast entirely, whether professionally managed or not, but they do allow for an easier/quicker exit than traditional commercial such as retail, office, warehouse, or multi-family. Happy to continue the conversation privately too if you want more dialogue on this, send me a connection request and we can go from there.

@Esther Rivera love the idea of owning a property you also use for your business. As @Chris Seveney already shared, the easiest option would be to utilize debt to secure the funds for purchasing the property. Assuming the person you have in mind has the capital and credit necessary to purchase the property and meet the lenders requirements, that would get a deal done. As @Michael K Gallagher shared, there is some benefit to putting yourself in a position to be able to perform a sale-leaseback option or other refinance once the property is open and has the financial capacity to do so. However, the question to answer to know which path to take is really "what are you trying to accomplish with a purchase." If you're trying to control your rent, owning and not leasing is the method to do so. There are a variety of ways to find the capital to make that a reality. Location is key for your expansion as Michael shared, so don't compromise on location to afford price if at all possible. Ultimately, should the business not succeed or perform as well as you intended, owning a property in a strong location will be attractive to other users that you could choose to sell or lease to yourself. Don't put yourself in a position where you only have one exit strategy.

Greetings,

I own a turn-key STR investment in NE Mesa, AZ that my partner and I are contemplating selling. In summary, it's a 1,950 +/- sf single-level house in a nicer non-HOA community. It has 3 bedrooms, 2 bathrooms + bonus media room with a triple bunk that sleeps a total of 9 people. We purchased and completely renovated the property, inside and out, in September 2022. Heated pool, hot tub, large putting green, indoor/outdoor living spaces, bonus media room with arcades, and all furniture and appliances were new as of the fall of 2022. The house is fully decked out and it would convey fully furnished of course, along with any bookings in place at time of sale. Professionally managed for 18% by a local management company with around 60-70 properties in their portfolio (but no requirement to retain them). Currently one of the highest rated STR's on VRBO with 20+ 5-star reviews and a 99% score rating.

The property is nearing the 1.5 year mark on the bookings market, with an estimated 10-12% increase in peak 2024-2025 rates. There may be the potential for keeping in-place financing for the property, but it would depend on borrower strength and a conversation with the lender, but no requirement to do so. Straight, traditional sale. No owner financing or "subject to" offers please. Market for this layout, non-renovated and non-furnished STR home in the neighborhood comps in the $600-630K range. We would entertain a price in the $680-700K based on terms of the deal and closing date, and what booking income conveys at sale. We have item list for everything in the property, receipts for renovation, and all the financials that you would need to analyze the deal. Message if interested.