All Forum Posts by: Greg Scharlemann

@Mudassir Syed yes, always factor in a vacancy rate. What percent vacancy will vary based on product type and submarket (this is true for SFR as well). Vacancies will happen and you not only lose revenue but have higher expenses to turn the house/unit/etc over.

On the SFR side cash flow will often be driven by how much money you put down. The higher the deposit the more cash flow but cash-on-cash returns will not be as good as other markets.

@Dean B. There is an apartment complex recently built (1-2 years ago) using modular construction in San Leandro along BART. Might be worth while connecting with the developer and/or GC on that project.

https://bridgehousing.com/properties/marea-alta-family-apartments/

Congrats and good questions. Here are some thoughts:

1. Historic: Yes, this will pose restrictions. Best to call the city to determine what is considered historic vs. what isn't. There may be specific architectural features that you can't touch because they are historic vs. the entire property. The city may direct you to a historic commission that will be able to give you more guidance.

2. Check the zoning. What is the zoning, what's a permitted use vs. conditional use. Are the existing uses grandfathered or will a use permit be required if you re-tenant with similar uses. If you want to change uses, what would be required. All good questions to also ask the city.

3. Not necessarily. Most limitations (outside of physical limitations from the property) in my experience have been from zoning and city requirements.

Might be worthwhile setting up a meeting with city planning officials and getting into these questions with them to better understand what you can and can't do. Good luck!

Anyone out there in the bay area focused on doing commercial office/retail/industrial deals?

Congrats on the tri. Thanks for feedback on GC. I'll let you know if I have any luck.

@Sudeep Jain - It's been about 4 months... I'm curious if you found a GC to work with in the area?

thanks

@Ian Ray - Start with underwriting the deals . At a really high level you will want to model current performance vs. future performance, what it will take to get to the future and how you will get there. 

In today's multifamily world, most are looking for the value add deal. Where do we spend money in order to increase rents and how can expenses be trimmed. Maybe it's through interior improvements or exterior upgrades. Maybe you're reducing expense by submetering water or implementing a RUBS program. There are a lot of different ways to approach it.

Once you figure out the business plan, the next step is determining how you're going to fund it. You can get a loan to cover a lot of the cost, but you will still need equity for the down payment, closing costs and often times repair/upgrade costs. This is where syndication comes in. If your underwriting and business plan shows you can drive rents and improve NOI, you can raise money from investors looking for a return. You get a percentage of the cash flow and so do they. Everyone wins.

Generally investors want IRR of 13%+ and average cash on cash return over 9%. But all investors are different so that's not written in stone.

Hopefully that helps with some direction. Happy to assist further if you have more questions.

@Tony Robinson - similar here, although on a 6 unit it's probably harder to syndicate and you're looking more for a partner. You do the work, they provide the cash and you split the deal 50/50, 40/60, whatever you can get them to agree to. Start by underwriting it and then solve for your investors returns. If it's 10/90 (you only get 10% of the deal) in order to get your money partner a decent return, it may not be worth the effort. 

@Collin Tilbe - did you come across any good recommendations for this?

1. Did the prior owner pull a permit when they converted it? Presumably yes and it was built to code at the time. 2. Typically if you're renovating and pulling permits you have to meet the most recent code requirements. You may be able to do present an alternative option (often called an AMMR - alternate materials and methods of construction) but really it's up to the fire official on what they're willing to approve.

Tamas Zsebe there are a number of companies out there that will buy the lease revenue for your cell tower. It's a legit biz. One approach is to compare the cap rate of the lease buy out against selling the cell site revenue with the property. For example selling the revenue now you might get a 6 cap where if you sold the building it would be at an 8 cap. You benefit by selling to the cell tower investors by 200 basis points. Get multiple quotes. Crown castle, landmark dividend and blackdot are just a few companies out there that will make an offer. There are also brokers that work in this space. This goes without saying, but be sure your lawyer reviews the documents before you sign.