All Forum Posts by: Christopher Telles

Your not going to want to hear this, but you need to rebuild a network. That network may need to include former colleagues if you want to jump start revenues.

Building a network takes time, and a whole lot of effort. Places you can begin are by connecting with people in direct contact with potential clients.

Will you work residential or commercial projects? In either case local real estate agents could be a good source for referrals. Call a large real estate office and ask when they have their weekly sales meetings. Then show up about an hour before, or an hour later if it's early early AM/ Take a large box of chocolates into the office with you and offer a chocolate to the receptionist(s) then walk around offering one to anyone who looks up. Once engaged hand them a flyer. Calling insurance agents is another source to see if you can get referrals from them to potential customers. Offer something useful they can offer their clients like a free heater bracket inspection/installation. It'll cost you nothing and should take you very little time.

For commercial simply call the office of each commercial real estate office and ask the receptionist to email (or fax) you a list of their agents. Then get on the phone and cold call them after you've developed a decent speil (pitch).

As with all marketing, especially networking, it will required consistent effort even when results are not immediately apparent.

Now. Go. Do. and win some business.

Welcome to investment real estate.

It's not uncommon for owner/managers to keep crappy books. As an investor working directly with a seller you should set yourself up to anticipate more of the same, more often than not.

If you're working with a real estate professional, I would recommend you use them to ferret out this information. Be insistent with that you need the information to enable you to make an informed decision. They too may find the sellers records to be challenging, but they should have a better chance at extracting this information from the sellers as opposed to the seller opening up their proverbial skirt to a potential buyer.

It's not surprising you would find that information in publicly filed documents.

First, as you've stated, these are commercial loans. Unless you know the circumstance revolving around the borrowing you won't know the extent of the lending.

Businesses borrow money which are secured by mortgages on properties as part of a property lending e.g. equipment lending, AR, credit line, etc. The bank may have issue an SBA 504 loan which actually closes simultaneously but it two separate loans with two separate rates.

The borrower could also have borrowed money to buy the property AND improve it as well. Some commercial loans look and act just like HELOC's with draw downs. You won't know until you know.

For your purposes of underwriting you should consider assuming the largest recorded lien is the correct loan amount.

The amount of the loan in place shouldn't really matter to much unless you're looking at a short sale or a possible foreclosure. The market value of the property is not determined by an outstanding loan.

Interest rates fluctuate as they are a larger part of the financial markets. A good rule of thumb is to use an index as a benchmark.

I like using the Prime Rate, as published in the Wall Street Journal, and then add a risk associated return.

Currently the prime rate is set at 3.25%. A typical 1st Trust Deed/Mortgage will have rate increase that today averages from 1 - 2% above the Prime Rate for a credit worthy borrower. This increase in interest rate, the 1 - 2%, represents the risk adjustment. 

Theoretically, lenders use the discount rate to determine interest rates; for example purposes, and a rule of thumb, I've used the Prime Rate.

A seller carrying back a 2nd TD will want to adjust the interest rate charged higher than say a 1st TD to account for the increased risk in lending to a buyer.

That interest rate increase above a 1st TD rate will in itself be anywhere from 2 - 5% higher. 

So IMHO a rate of 10% is higher than necessary for a seller to account for their increased lending risk. In fact, you could possibly find a hard money lender to lend this at a similar or better rate on what maybe friendlier borrowing terms (interest only, etc). 

A 2nd TD interest rate of 6-8% is reasonable given today's interest rates.

Data centers are a specialty breed. They almost need to be viewed as a special use property.

The infrastructure supporting the location often dictate whether a parcel/building is fit to use as a Data center.

Huge learning curve in this niche product type.

@Daniel Changand @jayhendricks have provided a rather comprehensive assessment of the situation so I won't address the issues they've already discussed.

I do want to add to the conversation by recommending you consider applying for a conditional use permit in combination with the submission of your existing improvement plans.

A conditional use permit would provide the use you seek, if approved, and at the same time retain the existing zoning, if it turns out that's the more desirable zoning. In many, if not most, circumstances a commercial zoning designation may be deemed to be the more desirable zoning and will drive a higher use value.

 I wouldn't be concerned of Auction.com being a valid venue for real estate sales. They're funded by some of Silicon Valley's largest and most powerful VC's in addition to receiving an add on investment from Google Ventures, Googles internal investment company. 

Auction dot com is a real online marketplace with to much to risk to operate using shady business practices. The terms are probably optional terms available to the seller, but I suspect they'll be strictly applied to the action by the online auctioneer.

Much success!

Auctions can go either way, they are real and a possible good value purchase can be achieved, or they are set up to find a potential buyer by priming the pump so to speak and then engaging/following those interested and/or testing the market to 'set' a realistic price expectation.

Here's the thing, just like any other deal, you won't know until you make an offer, and if countered continue until you are comfortable with a deal or walk. 

As in any opportunistic or value add opportunity, the investor extracts value when they make the effort others won't or don't, and are willing to put up capital up to the point when it starts to become uncomfortable.

If you like the possibility of owning this property then I would suggest you spend whatever my minimal amounts are required to get comfortable before the auction, not full due diligence just enough to answer any nagging questions, and then make your initial offer.

If the bidding starts to run up from multiple buyers then move to your next comfortable price. If it's beyond that point, walk. Then watch and wait.

You'll either see it sell, or it won't, and you'll then know there's an opportunity to potentially buy it for the last price in the auction, or less now that multiple bidders are no longer involved.

Design an acquisition plan. Don't deviate. Buy. Walk. Easy peasy!

This type of buildout is highly specialized. A lot of it would depend on exiting, isle placement, types of refrigeration, full or limited meat department, bakery, etc.

Even the large grocers like Albertsons can't estimate a cost per square for a store buildout unless they've designed and constructed the buildings to their specs.

Unless you're dealing with an experienced contractor who has built out multiple grocers, I doubt you'll be able to estimate a buildout cost.

This type of capital improvement is just to large a component of leading costs so my advise would be to spend the money and have an architect layout the store, they don't need to draw up plans just yet, and then find a qualified contractor, or two, or three, to bid out the job. You'll need to be prepared to tell them what type of fixture you'd want in the store to get an accurate cost.

I agree 75% ARV is good. I tend to underwrite conservatively and for fixNflips that number is a comfortable max even though a lower ARV would be more comfortable.

The project I mentioned was taken off the market. I made an appointment to walk it one afternoon and received a call from the listing agent (I would have represented my entity as a buyers agent) that the listing was being removed from the market and the sellers declined the showing. The agent told me they were within days of the listing expiring, as he had previously shared, and the sellers were tired of the selling process. So it was a no go.

Are you searching or doing deals in the Santa Monica and surrounding markets?