All Forum Posts by: Josh W.

Thanks @Paul Wright! We have had discussions with the city and they are making deals with businesses on a case by case basis, with the caveat that a percentage of the net profits go to the city. This is agreeable on our end depending on the terms. We are not counting on that income, but there are no "hard rules" about this issue right now. It's negotiated on a case by case basis. 

Thanks @Ronald Rohde

Do you mind if I ask what information you are basing this on? Just curious if you have experience in the Los Angeles commercial market. Any help would be useful... thanks!

Thanks @Joel Owens!

The building is in downtown Inglewood, less than 1 mile from the stadium. However the blocks around it are redeveloping quickly in downtown. We are allowed to build up to five stories on our lot (which is about 10,000 sq ft).

We are also grandfathered in with a municipal parking garage next door, with an abundance of parking. This makes things appealing to any retail tenant (especially food and beverage) and because of the garage, we could essentially  build on our 5000 sq foot parking lot, parcel it off, redevelop it into outdoor space, or whatever we like. The parking lot is not essential since we have the large municipal garage.

The billboard is also grandfathered in with the building, and a special use permit would be required. However, seeing that our project is being funded by the city, we believe those rights would not be an issue, just a negotiation. 

The loan at those rates is not ideal, however because the loan is coming from the city (SBA 7a loan), we believe there is some value in the strategic partnership, as they will be invested in our success. We may even be able to do two loans, so the city still has skin in the game, and we get a portion of our loan at better rates.

The coffee shop tenant is a friend and he builds custom retro coffee trailers and places them around LA. He has a proven brand that has been in business for some time. The concept is that he would just assemble a custom trailer INSIDE the bank lobby, and therefore no build out is needed. He just needs a 220 socket and the plumbing, which he would pay for. We really don't have to alter the space much to make this happen. Just demo and sanding the concrete floors, some decorating, etc. 

Agree with you on the investors -- where does one find passive investors for this type of situation?

Thank you sir!

Greetings BP friends,

So, my business partner and I live in Los Angeles and we are in the entertainment business. We've decided to create a new business entity to combine our companies and scale up our services. We produce TV shows and work with some high profile NFL athletes, and found a commercial building that could really make us stand out, especially when meeting with clients.

We found an old mid century modern bank in an area of LA near the new NFL stadium (which opens in 2 yrs) and the place has been meticulously taken care of and it's on a very desirable corner lot. It has enough square footage in the offices upstairs to house our production business, and the down stairs lobby and bank vault is perfect for a retail business (we've had two offers from coffee roasters to lease the spot already), so we are confident that we could generate income that way.

The building also comes with a very tall monument sign, which could be rehabbed into a digital billboard and generate passive income as it is visible for a mile in both. directions (it's the tallest sign on the street). From my research, this could produce a fairly good income.

We love this place and are pursuing an SBA loan as a way to leverage into the property at 10% down, and we have the cash to make that happen. There is very little construction cost (some demo) which we will handle with our own contractor, so the space is fairly turn key. It also has a long term tenant in the building who is willing to stay and keep paying rent as we transition over and plan our new space (about 6 months).

So here is my question -- we are not commercial real estate investors, but we believe this could be a great deal for our company and for a real estate investment. The location is excellent. And the city has reviewed our business plan and they are so excited by it that they are connecting us with funding through their economic development department (which uses SBA 7a loans). They have money earmarked for bringing small business to the area.

However, there is another non-profit that is also very excited by our plan, and they have offered to finance this through a combination of SBA 504 loans (40%) and a conventional loan for the remaining 50%. We would still put 10% down. The SBA 504 is about 4.76% interest rate, but the conventional portion may be higher and may come with some type of balloon payment. The 7a loan through the city could land anywhere from 7.5% - 11% but that would be locked and amortized over 20 years.

Does anyone out there have any experience with a property or situation like this? We are doing our best at crunching the numbers on our own, but we have never purchased a commercial property before and could use some third party assistance to make sure we aren't missing anything (we are even willing to pay a consulting fee).

Our agent is also the listing agent, and while the double agency is actually putting us in a great position to buy this property, we want to make sure our best interests are looked after before sinking into this long term.

Anyone out there have experience in something like this?  

Thank you!

Josh

All of your opinions are welcome and helpful. I have already started doing a deeper dive into specific numbers. As expected, I think the 150K quote could be very optimistic. Definitely keeping conservative on this one, so thanks for all the input and dose of reality :)

@Michael Tripp thank you! Would love to connect with you via PM sometime if you are open to that.

@Carey Greiner you nailed it. This would be all about appreciation in an up and coming neighborhood in Los Angeles. After living in the unit for one year, I could rent out all 4 units and cash flow a nominal amount. I haven’t found many $100 door cash flow deals in the LA market, but if my “rent” costs me $500 a month and offers me the ability to build equity, it’s not a bad deal IMO.

You are correct. The rehab costs are the big X factor for a newbie like me.

Some say play it safe, others say go big and learn along the way. I will have to figure that one out on my own!

Thank you for the input! I really have to determine the overall scope of the project and whether or not I am willing to take it on at the moment. Appreciate all the wisdom!

Thanks for your honesty @Patrick Soukup. It would definitely be a large project in my life at a time when I am busy with my career. 

After digging into some other properties nearby, one has a more profitable unit mix with some 3BR units and is priced similarly, but it is already rehabbed. Only half the units vacant but It could rent right away. No pool or upkeep. 

Doing a costly and long term rehab would be worth it for me if I could get it at a steal. And who knows, maybe they will get desperate at some point. But all things being "sort of equal," I would prefer to avoid the hassle. I'm glad I posted this!  What a great community. 

@Dan Oxman feel free to message me!