All Forum Posts by: Ryan Beasley

@Taylor Hazard and @Ethan Atkinson Sorry forgot to tag the both of you in the post.

Ethan, thanks for the reply man. I'm trying to make that transition from Residential into Commercial right now. The situation I'm in is a product of me farming around vigorously. It is a very hard transition so far but it's something that must happen. To be honest, the owner has talked to other agents about the property so I wouldn't say I'm in a position to refer this one off and collect a fee. I was actually going to consider going for it and co-listing with another broker. Maybe I'll handle the marketing expense and PR, they'll just make sure the logistics are worked out. Idk how the co-listing thing works. I've primarily worked with residential investors in the past but I feel like in the long-run, commercial investments will be a better play.

Usually subordinate debt requires a higher return than Senior debt. The same reason why equity investors have a higher required return because they are the last ones to get paid.

First off, thanks for the information. It's very helpful. I will need to co-list with another broker inevitably if I take the listing. I do know what those leases are and how they arranged but there is no way I have the knowledge to effectively negotiate for my client. I am trying to make a move into commercial, as I feel it suits me. I get how cap rates would increase as leases mature, as they purchaser would be taking more risk. Plus, They are bearing the cost of possible turnover and re-leasing commissions. My final question is, what is the best way of obtaining local cap rates besides the local broker network? My only solution as of now is MLS (which is terrible) and calling/dropping by the properties that sold off and asking at what cap rate they purchased it for. Also, what the current rent/sqft is.

@Taylor Hazard So, what I'm wondering is, is how do you estimate the value of a commercial property? The only way that I am aware of is to take the buildings NOI and to divide by the local cap rate for that specific property type. How would you appraise this property?

So is it currently fully rented? Also, maybe not now but in the future I would suggest adding a required return on your time (i.e. $25-$30/hr) and factoring that into the total cost of rehab. That may not be applicable now but in the future when you grow and you get more busy, opportunity cost becomes an issue fast. Sometimes it makes more logical sense to hire a sub

Yeah it is not high enough for large manufacturing of any kind. It makes more sense for an automotive shop that needs space to house inventory (cars, tires, other equipment) and also upfront Retail to check our customers. I have thought about co-listing but I'm not too sure how the other commercial brokers would feel about that. I don't have any experience co-listing a property but it could work. I'll discuss it with my broker. As far as I'm concerned and from what I've learned, which isn't much. Cap rates are one way of estimating property value. NOI/cap rate = price and they aren't sure what purchaser they are targeting. A small or large business or an investor looking to turn it around and lease it. Leasing rates are a focus, but aren't cap rates necessary to determine a fair price to sell it at?

Even with the property management fees that's a 29.58% return on equity and that's taking into account total cash to close estimate. That's a solid return my man. Also, good job on getting the 2% rule on your first deal. Was it fully leased when you bought it? Does it need any renovations? I'm assuming at that price it needs a little work, just a stab in the dark.

As far as using my local broker network. Hell would probably freeze over before any broker gave out any information on commercial leases. My broker is primarily residential so she isn't really comfortable answering any commercial related questions.

Taylor, thanks for the reply. The property is zoned Ag-5/R-1, which makes no sense, seeing as how it's a commercial building. However, the description for the building on the tax records is Retail-General Merchandise. It's 14,279 sqft and 10,911 of that is Warehouse. It's 4 units with 3 units of it vacant and the only unit that's occupied is the property owners autoparts store. The reason I came across it was from the position of working with investors that were looking in that area, so I farmed around and found them. So, we've only discussed selling to investors but I can see it's uses for a hardware store or large automotive shop for sure. So, are you saying that cap rates only matter when sold as investment property? I feel as if any purchaser would want to know local cap rates to be able to save face on re-sale value, just in case they have to.