All Forum Posts by: Steve McGovern

6 month’s is a long time. Levi T definitely has the right answer...but if you must go forward and try, the document is called an OPTION TO PURCHASE. Get an attorney to draft one for you (and maybe negotiate it too, depending on your level of comfort or savvy). Odds are good that the Owner won’t bite; you’ll likely need to pay a significant, non-refundable deposit with this document. If you have access to the Owner or his/her Agent, then it may be worth the inquiry: “what would it take to ask you to hold this for me until late spring?” Followed quickly by “you don’t want to have to sell it over the winter anyway, do you??” — you then become responsible for that purchase in the spring: what if something happens and you can’t buy...or don’t feel like it... or find an even better asset prior? The seller will need to consider contingencies for all of these scenarios and you’ll be obligated to them. Hopefully by now, you understand why an attorney’s input here is so important: both parties are at risk, and for a long time, considering the market today. My thoughts are that no SIMPLE arm’s-length property is worth this, neither from your point of view nor the owner’s... but you’re the master of your world. On the other hand, if it’s a family member or someone that you already have a decent relationship with, then it may be worth a shot. Tell us more of the details, and maybe more people can help. Good luck! Steve

No. But I turned over a few of these assets that were distressed and neglected during the downturn on behalf of an REO owner. Are you contemplating a purchase? I can definitely give you a couple things to look out for, if this is a new asset class to you.

Agree with the above— why’d you offer $525 to begin with, to then have the seller go up,... and you went back down? I think you’d have been better off staying at 525. No big deal, you lost nothing real, just opportunity which is Zero until it’s realized. Live and learn. I think your thoughts are good, in terms of #2– downturn— no one can say. If you’re living in this duplex, and if you’re expecting to pay some of a mortgage anyway, then that’s one easy way to mitigate the risk. However in terms of predicting “just how low” a downturn can go and making your adjustments now? No way. Just be as low as possible under your debt service. I don’t think we’re in a “$100 per door and you’re good” type of market at this moment. Keep in mind too that when a downturn hits, it comes in waves. First wave is from the initial cause— let’s say it’s a stock market blip. The second wave is Job loss based on that; then people can’t pay bills; more companies are hit; more layoffs, and somewhere along the line property values drop either as a result of tenants not paying rent, foreclosures in the area, landlords panicking and accepting less money for rent, etc. My point is, a downturn is an unpredictable, multifaceted tempest. Be conservative, but don’t paralyze yourself either.

Nothing wrong with Section 8– sometimes it’s the best way to get in low and mitigate risk in an over-heated market like ours. Others have mentioned making sure that your DD is airtight— I’d advise you to do that not just on the tenant side, but also on the property side: there are minimum requirements and property standards that you’ll need to comply with since you’re getting money from the government. Consult due diligence professionals (attorneys, inspectors, appraisers, etc) who are used to navigating these concerns in your area. Also if you’re not already, familiarize yourself with the following phrase and your obligations thereto: REASONABLE ACCOMMODATION. Not everyone who’s on Section 8 is there just because of “simple Job” issues. Know your rights, but know your tenants’ rights even better so you don’t wind up in hot water down the line. Good luck!

Marlon Thomas , Scott Choppin gave you some sage advice up there. I’d only elaborate and add one thing: rinse, and repeat! A sales license— the education and practice that goes along with it— will give You a solid approximation of the following skills and experience: a smattering of local jurisdictional law; it will teach you a bit about valuations, (and you’ll learn more about those and an asset’s place in the overall market and market analysis as you go); it will also teach you about fiduciary duty and negotiation, and you’ll get a ton of soft skills like networking, contact engagement, and marketing...All while you’re learning a thing or three about the physical assets. It’s a great start. But the part that rings truest in Scott’s reply is the part where he says that Development is extremely complex. Once you have about 6 moths or a year in, you should jump into another one of those areas: take a Construction Management course to learn about project management, contracts, and the IBC/IRC. Or if Construction doesn’t thrill you, then find a REFA-associated finance education program and learn more about dealmaking and analysis, and how those vary from asset class to asset class. Or maybe you grab one of your new attorney friends that you’ve made (and made money for!) and ask them to accompany you to a local Bar-CLE course to get better-acquainted with transactional real estate law, due-diligence, leasing, or land use/Zoning. Maybe you decide you love Agency and brokerage, and aren’t quite ready to develop yet— you should still take a few courses, and you can consider a designation in luxury residential, buyer’s/tenant’s Agency, affordable housing, or commercial RE. Once that’s done, rinse and repeat again! The complexity of the General industry— and even more so for development, proper— demands that we are well-rounded professionals who understand as much as possible about our craft and our own deals. Everyone from bankers to surveyors to the Tenants themselves play a part in a successful property development project.

@Christopher Golden, Welcome!  I think you should probably catch up with  @Bernadette Trafton and see if she & her group can help you out.  For that matter, join fundamentally any REIA in the area, but I know Bernadette's local to you but with a regional presence.   Most of what I do is Commercial and/or Development, but I'm happy to help you with ideas and those 'other options' too.  Construction's a great background to have...  BUT make sure to study the stuff you don't know as well (Due Diligence, Zoning, transactional, financing, leasing, and disposition concerns come to mind, depending on your experience with each.)   Good luck!   

Actually you nailed it:  LLs are "charging them differently."   In the retail setting the LL pays it and charges it back. in the warehouse, the Tenant pays them direct, in many cases.  

Think about the management of this matter-- we'll cover the three main "Ns":    

Taxes are (relatively) constant between the two asset types, all-else equal.   (In each case, Trade fixtures, personalty, chattel, etc. are all taxed to by the Occupant where applicable, and rarely if ever become part of the real estate. the retailer's tax may be greater, but not based solely upon the property tax.) 

Insurance cost is not perfectly similar, but similar enough-- again, assuming all-else equal.  Liability, on the other hand, is the concern of the occupant in a warehouse setting, and often contains provisions to limit the Owner's liability almost down to nothing, notwithstanding a roof collapse.    If a palate falls off a rack and crushes a worker... well, the racks, forklifts, and product all belong to the warehouse, not the Owner. In a slip & fall in a mall or neighborhood center,  on the other hand, everyone's getting sued, even if the slip was the result of spilled coffee in front of the Dunkin' Donuts.  

 Now Consider the maintenance between upkeep of a glistening bright welcoming mall on the highway interchange and the 'perfectly sufficient' but a little dingier space on the road with the potholes behind the highway and over the tracks.  The tenant in the retail space is (nine times out of ten) a passive participant in the management of the retail space, whereas (s)he is a very active one in the warehouse.  Furthermore, what maintenance (s)he can slide-by with in the warehouse space-- basic maintenance around $2 or $2.50 psf now must be perfected and gilded and cleaned on a weekly basis (at a minimum)  in the retail setting and costs him/her somewhere around $6 psf.   

 On the LL's side (your client) it may be that they're happy to relinquish CONTROL to the tenant in exchange for a lower rate.  Furthermore,  the leases can sometimes be longer terms (10+ years, first term is not uncommon in a warehouse) and include less protections for the Tenant.

@Ryan Beasley I am also not familiar with the conventions or Zoning in your area.  You got tons of great advice from pros above. I'd pay particular attention to the unique specializations between the types that @Joel Owens  called out.

The typical leases and LL responsibilities will vary WILDLY between these two asset-types-- in fact, I think I can safely assert that they're at the opposite ends of the management-control and responsibility spectrums. Retail Lessees pay out the nose, are responsible for NNN charges for improvements that they don't control, and often pay additional rents based on breakpoints-- BUT the Owner has to be able and willing to make all the top-tier improvements and maintain the property at the highest level for the sake of the general public who will visit this merchant.

On the other hand, Warehouse/flex space is typically "all in" at the Tenant level:  Taxes, maintenance, insurance, and all matters are handled directly by the Tenant in usual cases.  The only visitors are those who are employees or have direct relationships with the Occupant. Rarely, if ever, is a warehouse visited by the transient public.   

No doubt you're correct that you can do a better monetary job on behalf of your client with a Retail Use/Occupancy, but you also need to consider the rest of the fiduciary duty:  There's much less accountability, stress, concern on the part of a warehouse owner than a retail owner.
 

I would take a good look at your client.  If (s,t)he(y) simply don't have the appetite or ability to manage a retail space, then they may know best.  

In addition to my real estate work, I sold Benjamin Moore Paints for years to Homeowners, Investors and paint/coatings pros. I also tended to act as the 'onsite color consultant' at each of my stores.      As others have stated, any of the typical tans and beiges are reasonably sound;  I would also say that taupes have been on the rise for a long time, and are safe. (If you're not sure what a taupe is, then generally take a 'tan' or 'beige' and add a healthy amount of gray;  sometimes they can come off a bit green, too, but they're "neutral" not really GREEN by any stretch.  

A few examples? 

Shaker Beige, Bleeker Beige, Powell Buff, Bradstreet Beige, Richmond Bisque, Litchfield Gray, Grant Beige, Manchester Tan,  Rockport Gray,  Revere Pewter, Edgecomb Gray  and colors in/around these hues all are reasonably safe. 

Notice, too, that all the colors I just listed are from the historical collection-- they tend to be safer because back in the time which the colors are replicating, they simply didn't have the pigments available to create extremely bright tones.   Many colors in the giant 1000+ hue wall units that you see in the shop are similar to these and there's nothing wrong with them by any stretch, but if you just want a safe, timeless palate of 150 or so available to you as a go-to, then stick with the Historical Colors.  

AVOID YELLOW IF YOU CAN.   Look, yellow is a very nice color...  but it's among the most challenging to get correct in the space, and 99 out of 100 people choose a yellow that's just too vibrant, especially when sunlight starts to strike the color and reflect it around the room.  I can't count the numbers of people who have tried to bring custom yellows back to me to tone them down.  

When you're looking to purchase a yellow, Aim for a WHITE with a creamy-yellowish-hue, and above all, avoid the greener-yellow tones at all costs.  No matter how "light" they seem in the store, you always get the feeling that a schoolkid went nuts and colored the walls with a highlighter.   If you've got to pick a yellow for a kitchen... or a laundry room or darker hallway-space  then my favorite yellows are Montgomery White, Philadelphia Cream,  Monterrey White, and Hepplewhite ivory.  They're usually 'yellow enough' without giving you a migraine.  In areas with no/less light, then you can take Montgomery and enhance it ever-so-slightly...  but not much.  

Feel free to reach out if you have other questions.  I still work as a color consultant from time to time, for the fun of it.   

PSA ONLY-- Maybe this person will come forward with an opportunity to substantiate him/herself.  Conversely, if it's scam, then maybe people can alert others. 

My FT commercially-oriented RE team may be hiring. I was looking for candidates with certain criteria (Real Estate, Legal, Leasing) on CL's Boston pages, and I bumped into one of those 'world-promising' ads referencing the above-noted email address around Providence. Again, daniel teachnor (one word) AT gmail DOT com.

I grabbed the address to see if it was for real, and I put it into a search engine. 

It popped.  All over the country.  SanDiego, Denver, Washington DC, Atlanta, Ft.Lauderdale, SanAntonio... some targeting students (etc.)  No person with that name has an account here. 

As I said, this is a PSA only-- a 'caveat emptor' but no admonishment at this time.  Feel free to contribute if you know anything.   I did this once before when I had a concern about a potential investor, and the BP community replied with great info that was valuable to me, and hopefully to all. 

** For very good reason, I received a 'posting of contact info not allowed' here from BP when I tried to post this the first time.   If this turns out to be a scam, then if some administrator could re-assemble the address so others can search it easily, then, again, I believe this would be valuable to the community.