All Forum Posts by: Peter R.

@joel Owens

Awesome, thanks!

First, how do maintenance costs typically compare to a residential property? On a triple net, what items are you actually on the hook for?

Which capital expenses are covered by the landlord? For example, say the tenant wants improvements. Or say a tenant moves out and you have another who wants to move in but has different space requirements and you need to divide the space, or you need to do foundation work to install heavy machines, etc? In other words, who bears those costs? Is that negotiated in every lease?

What are my legal liabilities as an owner? On other words, say I own a building that's used as a warehouse and someone drops a box on their head, or slips in the mud, are they coming after me? How much does insurance cover?

Do you recommend forming an llc to hold the property?

How is a commercial loan typically structured vs a conventional FHa mortgage? How does taking on a commercial loan affect my personal credit?

Where do I go to find out how a piece of property is zoned here locally? Example, if I have a warehouse with two bays, can I erect a wall and divide it? Can I knock a wall down? Can I go from having a retail tenant to a warehouse, or from a warehouse to a manufacturing facility? Can I buy a plot of land zoned for farming and build a condominium ? What are the costs and items associated with a re zoning?

Phew! That was a lot.

@kiirill chervets,

Just looking for some ballpark figures to assess whether commercial real estate is viable with my current financials, maybe I will contact a broker or banker though I'd rather avoid the sales pitch. So any help I can get here on this site is much appreciated thanks

Ballpark...

What kind of loan can I expect to get with a credit score of 653/653/684, $120,000 in available cash,to put down, an annual salary of $112,000 (72 in salary, 40 variable comp), have been steadily employed by the same employer for eight years, zero debt including no mortgage, and very low monthly expenses considering I get a prepaid company vehicle complete with free gas, free auto maintenance and repairs, and a free iPhone with data and calling plan.

i am interested in learning more about commercial real estate for a possible future investment plan. Are there any forum posts you can direct me toward, user blogs, other websites, good books, etc?

Specifically I'd like to learn more about triple net leases and other lease types I might find here in Dallas, about legal liabilities I might incur, about financing options etc. I am also looking for a good resource to learn a little bit more about zoning, especially in this area. Where can I see how land is currently zoned? How would I go about getting land rezoned?

As you can see I have a lot of questions I'm digging around for a good resource.

@Jon Klaus

It's not that I'm stuck on the 2 percent rule or anything, but I do trust the collective experience of the people on bigger pockets and when they say that operating expenses on a residential property are usually around 50% of the gross rent, I believe that. Working backward from that, I can see that you do need your rent to be at about the 2 percent level to make a decent margin on residential properties.... however I have no clue what the operating expenses would be on a commercial property. If they are much less, then I wouldn't need to charge as much rent either relative to the purchase price of the building. That's my thinking.

@Jon Klaus

Thanks! Music to my ears. I'll keep plugging away then. One thing - by multifamily are you talking about duplex multifamilies or are you talking about actual apartment buildings (anything more than 5 units)?

@Joel Owens

Just doing some quick number crunching, the difference between the rent being 1.5% and the rent being 2% of the purchase price is all the difference in the world. The first gets you at a cash-on-cash return of about 5% per year (not a good investment), the second is about 25% per year (a home run). That said.... commercial property does interest me. Maybe I could do well with a small bay warehouse somewhere. Would you know if the triple net lease is common in Dallas?

@Jon Klaus

If you would, could you please comment on whether it's possible to find a property in a decent part of DFW that meets the 2 percent rule nowadays?

@Account Closed

Not about to let anyone run a hard credit check on me until I'm certain I want to pursue this whole thing further. The 120k is mine in cash. That's 30% of 400k, which I presume will be a sufficient downpayment should I choose to move forward with some property.

@Joel Owens

Bummer! If what you're saying is correct, then maybe I should be looking at a different investment vehicle and not real estate. I look at it this way - it's all about ROI. If I put in 100k out of my pocket, then I need to get an annual ROI that is better than what I would get with bank CD's, bonds, stock dividends, etc. That is because being a landlord, as you say, is work.... and I don't want to work for free. Buying a CD is no work, and also less risk as I'm not leveraging myself out. If I can't get a better ROI in real estate than I can buying a CD due to the current market conditions, then it's a poor investment. So I will keep on digging and see what deals there are, however I'm not committed to buying anything at the moment.