All Forum Posts by: James Storey

Hey Kevin,

It sounds like you are buying a property direct from a business that operated out of their own real estate. If that's the case, the property would be considered an owner occupied property and not an investment property from a value standpoint which means a CAP rate won't apply in this circumstance.

From a value standpoint, owner occupied property is valued on a per SF basis. You will want to find property in the area that have sold in the last 18 month that is similar and average out a price/sf to apply to this property you are buying. 

If you want to look at an ARV from a future potential investment value from you renting it out, then you would need to find rental comps as well as investment sales comps to go with that rent to project a value off of NOI.

It's going to be hard to pull comps without some sort of data source like Costar or Crexi or Real Capital Analytics. But you can start by looking at what is on the market on Loopnet and compare them to your property. It won't be real comps though because Loopnet is active properties and not sold properties. The other way is by connecting with a broker and have them help you comp everything out if they are willing to help.

James Storey, CCIM

Hey Jason,

I probably agree with everything said here. I am seeing apartment buildings in Bloomington run right around a 5% Cap or a little higher depending on size and locations. A 7% COC is still possible on the right purchases and right debt stack such as Fannie/Freddie, and FHA products on larger multifamily. We have brokered 2 deals down there this year and both ended up at an 8% COC leveraged.

James Storey, CCIM

Hey Thomas,

Commissions are negotiable and there is no standard. That said, I can only tell you from my experience and what I have charged. I did a 5 year industrial lease in Memphis where I represented the tenant. I got paid 4% of the full gross lease value over the entire 5 years. I don't know what the landlord broker made but I wouldn't be surprised if it was 2-3% of the lease value.

I can't speak for Michigan personally but I would imagine it is similar to most of the Midwest.

James Storey, CCIM

I agree with Russell. Definetly no standard commission and everything is negotiable. The last lease I did, I represented the tenant and charged 4% for the full gross lease value over 10 years. Not for sure what the landlord broker made though.

Hello Mary,

Are you referring to the business plan for the SBA loan products? If so, the answer is sometimes. I have helped clients put together their business plans but some agents and lenders won't be as hands on. Just depends on the type of agent you are working with.

James Storey, CCIM

Yeah I would start with seeing how much different rents might be between the ceiling heights. I don't know about Arizona, but here in Indiana, the difference for a modern clear height to a much lower clear height is about $1/sf-$2.5/sf NNN for warehouse space. That being said, I would take an analytical approach and figure out what your NOI would look like if you had to re-lease the space once this tenants lease expires. If the difference in rent is about $1/sf, I would take that $1/sf for the remainder of a 10 year proforma and discount it back at particular discount rate. A good rate might be a rate that is closely aligned with a market CAP rate in this instance. Whatever the present value of the NOI differential is is what I would ask for a discount.

In my opinion, this is how you would quantify the discount but most people wouldn't take the time to do this type of calculation so you might want to ask for a discount based on your gut telling you what your risk tolerance is. That being said, convincing the seller of these findings is a completely different ball game. Wish you the best of luck.

James Storey, CCIM

Hello Robert,

Great to meet you. I am a commercial broker in Indianapolis but do deals Nation wide. Mainly focus on NNN investments and multifamily investment. Would be interested in connecting.

Regards,

James Storey, CCIM

Hey Ryan,

As someone who works with clients in this situation all the time (I specialize in healthcare), construction cost, even today, rarely effect the decision to build. Since you and your partner took the initiative to purchase the land, you must have had some sore of business incentive for you to want to build your own clinic, correct? As an example, I am currently building a ambulatory surgery center for one of my clients in Indianapolis. By him leaving his current center, his share of revenue goes from less than 30% to almost 95% in the new center. Even with double the mortgage payment, the business is by far more profitable having its own center regardless of the construction cost. In other words, his alternative is to maintain as a micro share owner. Now, I agree, construction cost is currently out of this world but its just a mere fluctuation just like everything else with growing demand after the pandemic. 

My advice is that if the new clinic doesn't drastically improve the profitability, operations, or enjoyment of your business, I would sell off the land. However, if their is a big loss by not building the clinic, I would suggest reviewing and analyzing the alternatives.

James Storey, CCIM

In my experience, the lowest down I have seen on a zero cash flow deal was 10% but at the same time, I have seen a zero cash flow deal that was sold by assuming the loan which is theoretically less. On a typical investment deal, it is usually 25% down minimum with slight opportunities to ever get 20% down for high net worth and credit worthy buyers.

James Storey, CCIM

Its a decent designation. I get to earn it for free at KW Commercial. If it's the start to your career, I would do it. In my opinion, you should be working towards your CCIM though. However, I think the MICP is a start.

James Storey, CCIM