All Forum Posts by: Roger Doe

We're a small outfit so we do the lease estoppels directly instead of relying on our attorney.

Lease estoppels are used for purchases as well as lease financings to basically confirm that tenants are paying rent.  Lease estoppels have always been difficult.  Tenants think that something dastardly is going on.

Recently, one tenant has proven really difficult and I was wondering what strategies that you, fellow property managers have used to force tenants to sign.  In our leases, there is a provision that mandates a signature but lacks any enforcement power.

(I've decided after this latest incident to change my leases to include a copy of the lease estoppel and add a provision for liquidated damages per day for refusal to sign!)

What do you fellow property managers do when a commercial tenant refuses to sign a lease estoppel?

Recently, I've gotten a commercial tenant that has been particularly irksome even though the lease stipulates that a lease estoppel needs to be signed. Reason for his refusal? He says he simply doesn't want to. In other words, he doesn't give a crap and doesn't want to spend the effort in figuring out if the lease estoppel is ok to sign.

I can of course threaten him to terminate his lease but I would like to go the amicable route. Any suggestions that you, fellow property managers have found successful?

I think this is a great topic.  It's probably one of the most important topics to discuss for real estate investors since it can guide us on what type of investment will take off.

I wonder the effect of the current unrest in the lower income class is going to play out.  Of course I'm not sure but I wonder if we will follow Europe's lead. Europe has become much more socialist. I might be wrong but money isn't as important in Europe as it's in America and I think we will evolve to that mentality over the next 50 years.  Not sure of this since much of the reluctance to help is due to racial divide.  Not sure what it means for housing. If I had to guess, I would think that that there will be more demand for low income housing in the future. Even though low income salaries will be depressed for the lack of low skill level jobs (due to the export of manufacturing), I am guessing that government payouts are going to increase substantially. There are just too much unrest. eg Occupy Wall Street. I have a hunch that it's only going to grow.  I would take my money out of section 8 housing and put it into one tier above that.

The flood of Hispanics might be huge.  Their percentage of the population is going to double while whites will decrease by a third over the next 30 years.  I wonder if this population shift is going to have an impact on the type of housing.  Can anyone chime in on the ethnic tendencies of Hispanics?  For example, I work in a heavy Russian population.  More so than others, they love bigger kitchens and bathrooms so I try to invest in them more.  For example, you can have a tiny backyard but make a big, nice kitchen and the house will sell for premium.

I'll be honest, I feel the same way as you do and I've grown to a small but decent size.  I'm assuming you'll always feel this way.  There will always be someone who's doing something bigger and you'll feel jealous.  But, that's what motivates us, no?

Here is some advice:

1. Always keep learning and growing.  Besides capital, the biggest constraint in our business is knowledge.  You can learn a lot in ten years.  Just keep plugging away slowly.  Don't burn out.

2. Be careful of the asset that you invest in.  I've had the privilege of seeing my father's peers over 30 years and how their investments panned out.  There is a huge range of values.  One had bought a lot in a busy but low income area that 30 years later did not appreciate much relatively.  He was always hoping that one big investor would come along and it never did.  Another had purchased in a vacant area that turned and he literally made tens of millions once developers developed the entire town.  Another had invested in fast food spot and hasn't changed much since the location is bleh.  

Blake's post is pretty good.  Shows you what can be done.

Additionally, you can also put in a clause that rewards the contractor if they actually finish the work earlier than planned.  It pushes them to finish faster which decreases your carrying costs.

Get a good lawyer that focuses on development (not just real estate transactions).  This will cost you some money now but you can use this same contract for your future projects.

I'm sorry that I have to be the one to say this but your parameters are impossible.  It's impossible to find a multifamily that's only $100k that has good cash flow.  Forget cash flow.  It's impossible to find a multifamily that has no cash flow and is $100k.

With only $100k, you'll need to start with purchasing single family homes in low income neighborhoods.  You can flip them by contacting wholesalers and purchasing them for $50k.  Put $50k into them and then flip them for $125k.

If I was starting out, I would partner with a contractor who would vest a little money so he won't just take the money and run.  Learn from him and after a few flips, you can do it on your own.

Just curious but did you mean that the occupancy is 80% or the vacancy is 80%?  I have a feeling you meant 80% vacancy.

Just a flip side in buying in these areas is that the cap rate on properties in these types of areas are usually very good.  I hate using cash on cash return as a measure of performance because it doesn't factor in the risk of the property (eg you can leverage at 100% and get a phenomenal return but you can easily go bankrupt) but when the cash on cash return is over 20%, it's a pretty tempting buy.

Be careful by underestimating the seller's attempts at leasing up.  People are not dumb.  They can be lazy but people usually aren't dumb.  There is a reason why the vacancy is 80%.  You don't need a computer to lease up space.  Check the surrounding office vacancy and I'll bet that the vacancy is similar.  You won't be able to fix the units up, re-rent them, and make a profit if the rental rate is $10/sq ft.

On the other hand, look at the Class A property in the neighborhood.  I bet you the rent is at $15-20/sq ft.  You want to aim for that.  But, you'll need minimum finishes and big thing is parking and safety.

Hey, thanks for replying.  I would be interested to see why you say that.  Here is my take on it.  I'm sure you have more specific experience than me.  I'm only talking in generalities.

Medical offices.  Can medical offices have value since they can be converted easily from regular offices?  There are issues such as elderly/handicap access and sufficient parking but on the most part, can't office buildings easily be converted?  With Obamacare, I do think that doctors will be more busy a few years from now.  Not sure that will translate to higher reimbursement rates which will mean increased income.  I thought about medical offices but I didn't see the clear cut value in holds.

Strip centers.  aka neighborhood shopping centers, I wonder why you think they hold value and might increase in value in the future.  The way I see it, rent is based upon the income of the neighborhood (among other factors).  I don't see that much value in strip centers generally because I don't see towns going up substantially up in income except for areas that focus on growth industries.  However, I do see strip center deals that are good when they are strategically placed, regardless of the town.  For example, when there is a dearth of modernized strip centers in a neighborhood, if you come in and clean one up, I think some new businesses want that. eg. five guys will pay premium rent if you build them a well thought out parking lot and arrangement of stores.

My opinion.  I live near NYC and I see very fast growth in areas that cater to the finance industry.  The only problem is that it's very hard to find good deals because everyone is looking for the same exact thing.  For example, you could buy a brownstone for $1 MM, put in $500k and then flip it for $3 MM.  But the problem is that demand these days have driven those run-down brownstones to $2 MM and then your profit margin is gone.

Hello, I'm sort of new to the forum.  Looking for real estate investors with about 10+ years of experience to just talk about real estate.  Of course, anyone can chime in.

Just wondering what kind of opportunities that they see out there.

I'm currently doing rehabs of commercial properties and just thinking about what I can invest in 1 year from now. SFH (high or low income)? Brownstones? Medical office properties? Just wondering what might be hot a few years down the pipeline.