All Forum Posts by: Mark H. Porter

You’re looking at this as a homebuyer, not an investor.  Net cash flow is what pays the bills and has been my hallmark for 25 years.

NOI minus capex set aside minus debt service - this is what sets the standard

Like you mention, ten units would be commercial and therefore an ARM. I haven't seen commercial properties use fixed rates ever.

I'm closing on commercial in two weeks with a 5yr, 4.25%, 78%LTV, 23 year amortized.

You’ve got $600k of buying power.  Can’t you find a positive pre-tax cash flow duplex in Atlanta for that?

@Myrtle Mike Thompson I’ve been using CCNB for the last few years.

STOP basing your decisions on ROI and simply pay attention to pre-tax cash flow. Travel and living don't care about ROI, they care about how much cash is in your checking account at the end of the month!

Does it matter whether you make 5% on $2MM or 10% on $1MM?  No.

If all your assets are in real estate then I suggest that you start working on only 50% of the assets being tied to real estate and the other 50% being spread among equities and fixed income and retirement allocations if possible.  You need to talk to a great financial planner (not my gig) who can advise you on correctly planning for your future.  It’s not your tax person.

@Ronald Rohde agree.  This past six months or so have seen ridiculously compressed cap rates across all commercial properties classes.  However, I was able to 1031 out of a STNL and into two strip malls (one, mostly nationals, the other, all regionals) without having to pay to a 5 cap.

As to appreciation, and as you say, a few renewals with increases and cleanup of CAM and you’re into a very nice appreciation in just a couple of years.  

It’s all a matter of your risK tolerance.  If the buyer wants low risk they are going for the 10-year leases with 5% increases and are willing to accept a sub-5 cap.. If the buyer is willing to play the renewals in 3 years so they can bargain better for option increases then they can see a +6.5 to whatever.  I am the latter.

@Ronald Rohde Ronald, my last STNL was with Walgreens and it was a NN deal as I was responsible for the roof, structure, and utilities from the street to the panel.

All-in-all a good gig as I had a few roof patches which were minor and they pay the property taxes, insurance, and utilities directly.

Things get much more convoluted with multi-tenant as they all negotiate differently.  Having the class A nationals is great for drawing other tenants in but let’s face it, they know who holds the cards (e.g “option renewal incentive program”).

Hi, I live in North Myrtle Beach and do both STR beach houses as well as commercial investments in STNL and class A and B strip malls. I am the principal, not a broker.

One thing I've learned on NNN deals is those three letters can be interpreted many ways, especially when in a multi-tenant scenario. If perfect, all the landlords expenses are paid for but digging into leases reveals caps on certain expenses (property tax, insurance) or CAM, or certain parts of it, can be excluded from one tenant but added to another.

Make sure you have your attorney complete analysis of the leases prior to the end of due diligence.  I haven’t gone through a deal yet when we didn’t find something that raised our eyebrows.

Hi, you need to decide whether the foremost purpose is revenue generation or a place to build family memories. If revenue generation, you need to look at it from The standpoint of others - beach, lazy river, restaurants, child care, amusements, etc.. all add substantial costs in the form of HOA fees.

If primarily as a place for you to vacation and you want revenue generation just to help that, you may want to stay away from the condo-hotel concept as it can get quite crowded and use of the amenities can get quite competitive in-season.

I would also suggest you start reading up on the pros and cons.  Also, start digging into financial concepts such as Operational Expenses, Income, Net Operating Income, chart of accounts, debt servicing, management  and reservation fees, capital expenses, pre-tax cash flow, depreciation and depreciation recapture, capital gains, etc…

I live in North Myrtle Beach and have a few rental houses on the beach along with commercial properties Elsewhere.  Concentrate on reducing your risk by getting as educated as possible before making a move.

Paul, you’re going down a slippery slope even going out with this realtor.  As I know many on here will agree, this is business, nothing more.  You cannot get attached to tenants, realtors, bankers, insurance agents etc…

Many like having a good relationship in business.  But that relationship is only good so long as you can tell them to PO.