All Forum Posts by: Don Pearson

@Matthew Swope I agree that your "partner" should not be the sole beneficiary to commissions. I am also a Broker and a Partner. Everyone has their own approach, here's mine:

- If I'm purchasing a property that's being represented by a Listing Agent: (a) I get that LA to represent me so they earn the buyside commission as well and are incentivized to fight harder for my offer, or (b) if the LA does not want to dual represent (a rarity) we waive the buyside commission and give it back to the seller, which closes the ask/offer gap.

- When we sell a property I represent the Partnership as the LA, but only charge a 1.00% fee - the vast majority of which is marketing (spent on mailers, website collateral, etc), and admin costs. Any additional fee (1.5% or so) that would normally be earned as a LA flows straight to the bottom line. 

My bottom line - if a Partner earns a fee, that fee should benefit the entire PartnerSHIP. 

Good luck!

@Bhavin Doshi My thoughts may run very counter to the BP norm - especially given (i) I am a sponsor and syndicate deals, and (ii) the majority of the advice on BP does not address other investable channel, such as the equities markets (yes, the stock market).

I'm specifically keying in on your self-proclaimed lack of experience. With all due and absolute respect - you've never invested in RE (outside of your own home), you have no team/contacts, and I would question your ability to discern between a syndication offering up a home-run opportunity versus one that's been underwritten with sky-high and unachievable expectations - many of the latter are marketed in such a way that your sold on glitz-and-glam as opposed to project fundamentals. Don't get me wrong, there are plenty of highly qualified, competent, and trustworthy sponsors out there. You just need to be cautious given the lack of TRUE transparency in these investments.

So my thoughts: 

A) Stash your cash in some low yielding account while you gain the knowledge, build your team, work to understand what makes one project or sponsor better than others, understand market drivers, etc. Put together a list of intelligent questions - find people that answer those questions in a manner that's in line with your own goals. Place your bets, trust, and confidence accordingly.

B) Take your cash and open up an investment account dedicated to REI. Identify those asset types you feel have the best opportunities for growth and are in-line with your objectives (I personally like domestic cold storage, self storage, last mile distribution, multifamily, senior housing, bio sciences). You can Google which publically traded companies specialize in each asset type and invest in those companies as you would any publically traded investment. Most offer a dividend in the low/mid+ single digits with the prospect of price appreciation. Publically traded also means they have higher regulatory standards for reporting and much more transparency than 99% of the private syndicators out there. Your due-diligence with these investments is akin to reading through a company prospectus versus a deal specific operating memorandum. Your maintenance responsibilities are to read/understand the companies' quarterly/annual reports and decide whether their results/prospects are worthy of your continued investment. Oh yeah, and your invested cash is significantly more liquid than most syndication deals.

There are sooo many ways to participate in REI. Go find what works with your style and goals and build one day at a time.

All the best in your REI efforts. Don't let FOMO find you in a regrettable position. Go get your knowledge on.

@LloysSegal - given the latest Covid restrictions, will you also have this available via online stream?

Hey Peter, Real Estate is a team sport - take your time and put together your team; pool everyone's resources, be it cash, knowledge, network, etc. Multiple inputs from a trusted group can help you get past the paralysis we've all been through.

I also agree with @JulioGarcia - there's still plenty of opportunity here in your own backyard! Unless you have a team, or some other network available OOS, tread carefully and go in ONLY after you know/understand EVERYTHING about that market, asset type, partner, etc. 

Happy hunting!

Investment Info:

Industrial commercial investment investment in Carlsbad.

Purchase price: $3,250,000
Sale price: $4,600,000

Identified, built, and marketed “Creative” flex-office improvements to attract progressive flex-office/industrial users from the Carlsbad and surrounding submarkets. Building and industrial suites were previously “black-listed” and deemed “too tired” and functionally obsolete by the brokerage and tenant community.

Through thoughtful and strategic sourcing, we were able to complete high-style “creative” flex- office design for nearly ½ the cost of competitive landlords.

What made you interested in investing in this type of deal?

-Coastal location.
-Acquired below replacement cost.
-Saw an opportunity to profitably reposition an old, tired asset.

How did you find this deal and how did you negotiate it?

Broker relationships

How did you finance this deal?

Combination CMBS debt and private equity

How did you add value to the deal?

See description above and pics below

What was the outcome?

-Significantly improved the building, neighborhood, and tenant profile.
-Created a backlog of demand for industrial/flex space where none existed prior.
-Sold as a part of a larger portfolio sale, at a significant profit and return to investors.

Investment Info:

Office Space commercial investment investment.

Purchase price: $10,900,000
Sale price: $13,825,000

Built, and marketed “Creative” office improvements to attract progressive office users from the downtown SD, Mission Valley, and Point Loma markets. Building previously “black-listed”, deemed “too tired”, and obsolete by the brokerage and tenant community.

Through strategic sourcing, we completed a high-style “creative” office design for nearly ½ the cost of competitive landlords. Increased occupancy from 60% to over 95% in just 6 months. New lease rates increased from $1.75 to $2.65 psf.

What made you interested in investing in this type of deal?

-Location, Location, Location
-Path-of-progress deal
-Opportunity to fulfill demand for "creative" office space where none existed at the time

How did you find this deal and how did you negotiate it?

Broker relationships

How did you finance this deal?

Combination of CMBS debt and private equity

How did you add value to the deal?

See description above

What was the outcome?

-Turned a blighted and forgotten building into a jewel-box investment.
-Sold as part of a larger portfolio sale.
-Sold for significant profit and return to investors.

Lessons learned? Challenges?

-Identify the highest-and-best-use given the current improvements, economic environment, tenant demand, and cash on hand.
-Brokers want an "easy" deal. Build something with some sizzle that's easy to sell!!

Investment Info:

Small multi-family (2-4 units) buy & hold investment in San Clemente.

Purchase price: $700,000

Identified and acquired a low-risk bank owned duplex in San Clemente as a long-term hold. At $230 per foot, the property was acquired at a significant discount to replacement cost.

With an improvement budget of approximately $85,000, we significantly enhanced the look and feel of the property through strategic renovations, delivering significant value to the project and neighborhood.

The duplex currently projects a high-end look which provided for an increase in rental rates of nearly 40%.

What made you interested in investing in this type of deal?

-REO purchased during a very favorable time in the market (not favorable according to the naysayers of the time...).
-I knew the area and economic drivers.
-Path-of-progress opportunity.
-Purchased below replacement cost.

How did you find this deal and how did you negotiate it?

-Had an offer in the day it hit the MLS.
-Gave up the buy-side commission and gave it to the Listing Agent as incentive.

How did you finance this deal?

Combination of cash and debt.

How did you add value to the deal?

-Improved curb-appeal.
-Thoughtful improvements/upgrades and paint scheme in the top unit.
-Full gut-and-redo of the downstairs unit.

What was the outcome?

Long term hold with strong positive cashflow. BRRRR deal.

Lessons learned? Challenges?

I should have purchased 10 more during that time...

Investment Info:

Small multi-family (2-4 units) buy & hold investment in San Clemente.

Purchase price: $700,000

Identified and acquired a low-risk bank owned duplex in San Clemente for a long-term hold period. At $230 per foot, the property was acquired at a significant discount to replacement cost.

With an improvement budget of approximately $85,000, we completed:
-New Interior / Exterior Paint
-New Windows
-New Flooring
-Fully renovated lower unit Kitchen and 2 Bathrooms
-New Forced Air Units
-Sustainable landscaping including installation of new water-saving irrigation and drought tolerant plants
-Significantly enhanced the look and feel of the property through strategic renovations, delivering additional value to the property.

The duplex currently projects high-end curb and interior appeal which provided for an increase in rental rates of nearly 40%. The building continues to generate strong, stable cashflow, while nearly eliminating R&M and CapEx costs.

What made you interested in investing in this type of deal?

-REO purchased during a very favorable time in the market (not favorable according to the naysayers of the time...).
-I knew the area and economic drivers.
-Path-of-progress opportunity.
-Purchased below replacement cost.

How did you find this deal and how did you negotiate it?

-Had an offer in the day it hit the MLS.
-Gave up the buy-side commission and gave it to the Listing Agent as incentive.

How did you finance this deal?

Combination of cash and debt.

How did you add value to the deal?

-Improved curb-appeal.
-Thoughtful improvements/upgrades and paint scheme in the top unit.
-Full gut-and-redo of the downstairs unit.

What was the outcome?

Long term hold with strong positive cashflow. BRRRR deal.

Lessons learned? Challenges?

I should have purchased 10 more...

Investment Info:

Small multi-family (2-4 units) fix & flip investment in San Clemente.

COMING SOON!

Fix and Flip multifamily. This project is the quintessential worst house on one of the best streets in downtown San Clemente. 

Sitting squarely within a mixed use and short-term rental zone, this property is just a 10 minute stroll to the pier and less than 1 block to San Clemente's dining, shopping, and entertainment center. Directly in the path of progress. New owner will still have plenty of "meat-on-the-bone" with opportunity to operate as a short-term rental and/or pursue long-term development play.

Can't wait to get this project off the ground! Updates coming soon!!

What made you interested in investing in this type of deal?

1. I know the market and economic drivers well. Property is directly in path-of-progress.
2. Anticipating 16.50 - 23.26% annualized returns (underwriting of total project cost, hold period, and exit price range).
3. Backstop is achievable positive cashflow post renovation.

How did you find this deal and how did you negotiate it?

On Market. Relationship with Listing Agent. Waived our buy-side commission and had Listing Agent represent us.

How did you finance this deal?

Combination 70% Loan - 30 year fixed, and equity (closing costs, down payment, carry, and capital costs).

How did you add value to the deal?

Planning full interior and exterior renovation.

What was the outcome?

TBD

Lessons learned? Challenges?

TBD

Casual, fun, and focused: grab a drink, introduce yourself, then spend some time getting to know everyone. No selling, no pitches, just people interested and/or invested in real estate getting together with other like-minds to connect, collaborate, and sharpen. This is an open meetup, so feel free to extend the invite to others that may have interest.