All Forum Posts by: Jon Raccah

@Dennis Johnson Id love to take a look at some details if you wouldnt mind emailing them to me. I have a bit of experience in private equity and private debt and maintain many relationships in both those fields. 

JR

@Rich Hupper , 

A mentor is truly the most important because on the CRE side there arent alot of resources when it comes to the acquisition of baseline knowledge. I can try to point you in the right direction but i would need to know more specifically what you mean by "commerical real estate acquisitions and leases"

JR

Paul, 

Many developers dont like to hold assets and in certain markets it makes more sense to sell individual spaces because there arent many instituational type investors with interest in the given area. 

Ill try to put it in simple terms. Essentially youd be buying a condo, conceptually its the same as buying a residential condo. Theres an association that you have to pay dues to for maintenance, certain convenant restrictions that may not allow certain uses, so it comes with its own set of challenges. 

Id like to hear some more details if you wouldnt mind, but a quick and easy way to always do a quick analysis on a commercial property is ask for the cap rate. Then research other cap rates in the area (if available) and see if the pricing is inline with the market. 

Hope this helps, 

JR

Ryan, 

I'm a CRE Broker myself, although I really focus more on development and I'm very niche in my brokerage. The 3 types of specialization are different and I'll outline my experience below. Another thing to consider, will you be coming in at the analyst level or directly as a broker? and if you're coming in as a broker will you be assigned to a Senior Broker (who can train you?) Brokerage is a difficult relationship driven business, so it's important to make sure you go into an environment that will be willing to invest time and effort into helping you develop your professional skill set.

1- Investment sales, (this is my focus) This is a low volume high margin business. For example, I haven't closed a deal in over 14 months but the deal I have under contract now is for $25mil+ and will net me a commission of ~$750k (as in repping both the buy and sell side). Its also important to note that within this category there are many product types and economic specializations (industrial, medical, office). Find out a little more about the brokerage and whether they will put you in a product type team, and send me a PM and i can expand on each one if you'd like. 

2- Landlord rep, this can be extremely lucrative and tends to be more high volume low margin. Basically, the name of the game is finding property owners willing to let you lease their asset for them and if you do a good job and maintain the quality of your work you basically can create recurring revenue into perpitutity. Again many people specialize by product type in this sector as well so it just depends what the firm and what you want to do. 

3- Tenant rep, can also be lucrative but is the worst option in my opinion. I look at it as essentially the worst of both parts of IS and LR. Low volume low margin. You're essentially selling a tenant on a deal only to receive a fraction of what you could (in most cases) for selling them the property. It's essentially the same amount of work as investment sales for less money, with less likeliness to lead to more income from the same client. 

I hope this was helpful and id be glad to talk over it a bit more if youd like to in a PM. Of course every sitaution is different these are just my opinions based on my experiences. This was hard earned knowlege for me so I hope you use it well! 

JR

Sean,

Just would like to add my 2 cents.

If we take as abstract a view as possible on the industry that we are all so passionate about it basically boils down to this. Real estate in all forms is to support local population. Supply and demand apply to any economic situation so it's not quite as simple as saying more jobs means more demand, its likely that developers have taken notice and began to build as well. So its important to understand (when considering investment) what type of jobs are being created? executive jobs will lead demand into the high value areas, minimum wage jobs will lead demand into the lower value areas. 

I live in Miami (most of the time) and this market is a great example of that, we have alot of people moving here, decent (good paying) job growth, but there are 25,000+ condo units in the greater downtown area in some stage of development (proposed, pre-sale, under construction, etc.) to put that in perspective theres is currently a total of ~24,000 condo units online. 

Now while all these are true and markets act crazy sometimes dont let the macro picture discourage you from investing. Know your numbers, understand your values, wait for the right deals, then go for it!

JR

Chris, 

Mezz debt is basically a subordinated debt position. There are a alot of private debt issuers that issue mezz debt and in my experience they are alot easier to deal with than the banks. With the private debt guys it tends to be conversational, you can turn a no into a yes if the deal is good enough, at most banks computers and algorithms are making the decisions so there isnt much "vision" (not sure if thats the right word). The trade off is the interest rate is ususally higher and the term isnt the traditional 25 year ammo, but its an option that could get you your asset. 

Christine,

I was actually just speaking with an acquaintance about this exact subject and how it applies to my situation. Although my situation is quite the opposite. 

I'm 26 and I've developed a decent amount of real estate. I'm at the point now where I have no debts, own my home, and a good amount of cash. My acquaintance is a guy who made an extraordinary amount of money developing all over the world and later in his career sold everything and put his money in NNN leases and residential real estate (mostly B/C buildings in A/B areas)

Basically his rationale is while residential is a bit riskier the returns are much greater so he hedges that risk with the NNN leases. I'm personally planning on following a similar model although in today's market I'll have to wait a bit as I'm not crazy about Acquisitions at these prices.

So basically, never sell!

JR

@Daniel Highsmith,

First, nice spreadsheet!

That being said you have some line items that shouldon't be there. Keep in mind that a proforma (that you created above) is meant to act as an income statement and showe recurring expenses not Capex type expenses (so closing fees, new appliances, etc wouldn'tbe included)

What your going to want to do is make 2 different sheets. 1 call sources and uses (or S&U) where you essentially outline where the money is coming from and what it will be used for. Then you create a proforma like you did above, but only with the recurring revenues and expenses. 

If you'd like you can send me a DM with your email and I'll forward you over one of my many spreadsheets 

JR

 Kemdrick,

Send me a PM. I have a thought. 

JR

Alexandra,

This can be a very lucrative niche. I have a buddy who bought an apartment building next to college that kept expanding in Central Florida and the school now leases the entire building from him in a really nice net lease. 

While this can be a less competitive niche market it doesn't come without its challenges. According to my friend you must make sure to have a parent/gardian/guarantor to ensure the rents are collected and make sure you have a solid structure with VERY durable finished if you plan to rent to men. They're downright destructive. Also bear in mind students don't usually stay around for the summer and it's rare for you to keep the same tenants for more than a year or two. 

Hope that helps. Feel free to DM with any other questions and I can ask my friend.