All Forum Posts by: Tim Rostro

Hello,

I'm planning to attend and this would be my first time attending.  Will there be a private room for this event or out in the open?  

Thanks!

Great post.  My first house, which I still have today, was a fixer upper and I didn't know a damn thing about renovations.  I just bought some books and Youtube wasn't around.  The house needed a lot of work.  And I did this after my regular job (Army at the time), spent a few hours during the work week, then all day on the weekends.  It took over a month before I finally settled in there.

One of the main issues was the carpet.  It was nasty and needed replacement.  Cigarette burns everywhere.  Pulled out that carpet and it looked like it was never vacuumed in ages.  The dust, nail clippings?, and whatever nasty azz shiite flying all over me.  In the middle of a Texas summer.  I didn't have a mask on.  I ended up putting floating hardwood panels instead of carpet and vowed never to have carpet in my home after that experience.

Outside in the backyard, it was a jungle with debris, leftover lumber/wood/scrub, and grass two feet high.  The previous tenant didn't like to be outdoors apparently.  Before starting, I had to kill a few wasp nests that had settled in the overhang.  These nests weren't small, they were the size of soccer balls and the wasps were none too pleased their homes were demolished.  The easy part was painting the interior and exterior of the house.  In the span of 6 months, I had to replace the AC unit, water heater, and refrigerator.   

@Jay Hinrichs

I too live here in the PNW, just south of Olympia, WA.  It's beautiful outside, in the mid 60s, and I can see Mt Rainier from my front window.  It's awesome but then I have to remind myself, come the fall and especially November through March, the "weeping rain" and no sun for months will be upon us soon.  The summer is fleeting out here and I urged out of towners to visit the PNW during the fall/winter to see if they could handle the weather at that time.  I'm considering a second home to warmer, sunnier climates and return when the weather gets better.  

Quote from @Henry Clark:

A. Is there a logic behind paying taxes twice? LLC and as an employee?

B.  You say the numbers look reasonable.  But you haven’t done commercial before.  Recommend you do a post on your numbers and see if anyone has advice.  Did you factor the cost of switching from a law office to a dental office?  Do you have capex budgeted?  What period do you have budgeted for not being rented?   Etc

Thank you for commenting. I had just finished consulting an attorney from a law firm based out of Dallas who also deals with LLCs and you are absolutely correct with Point A. The LLC will be taxed under Schedule E on my taxes. The C Corp would pay me as an employee and he advised that not be beneficial. As for the numbers, I posted them to another BP member in this forum.

Quote from @Michael K Gallagher:

@Tim Rostro I work mostly in retail site selection for commercial properties, all over the country, and I'd say the biggest thing to wrap your head around is the concept of the value coming from the income of the property.  Meaning that the lease on the building that is currently there is the real value, and that the future plans or future uses are the future value of the property.

Also, when it comes to being the LL of these properties there is substantial investment you'll traditionally have to make in the form of TIA or tenant improvement allowance when the unit turns.  You don't have to do this, you can lease spaces in an "as is" state, but that will impact the $$/SF you can get for the space.  

Commercial leases and deals truly need to be looked at from a "holistic" view, its not just the rent, or the NNN expenses, but the total view of the lease in place. Things like cancelation rights, or first rights of refusal, etc can impact your valuation and lend-ability on the property, so I'd say your next "homework" is to study some leases on this property or others and learn the ins and outs of the lease dynamics and the different levers you can pull in these days to make them better/worse etc.

Thanks for commenting.  There's more research I need to look up before placing an offer.  This feels like the first time I bought my first residential rental property.  A lot to digest.  Hopefully, the process is much more easier as I continue to make future deals.  

@Lucia Rushton

My friend belongs to a commercial brokerage.  Sent you a DM.

@Scott E.

Thanks for the response.  Here are my numbers I have so far and they are rough numbers.

The property in question is a brand new property in a suburb north of Dallas/Fort Worth. One unit is 1610 SF, office/medical, $26 NNN, $523,000.

I am prepared for a down payment of 30-38% of the purchase price: $157,000-$195,000 (no wonder it's a barrier to entry with these amounts).  I also have the funds for closing costs and capex.  I have budgeted another $50,000-$75000 for this.  I'm going with the 38% down payment.

Using an online commercial property calculator, based on a 8.5% interest rate, 25 year terms, and $195,000 down payment, the final numbers are $2641 per month.  If the interest rate went down to 7.5%, the final amount is $2423.  I'm hoping to buy points if that's possible and refinance in the future.  

As for the rent, 1610 SF x 26= $41460= $3488 per month.  Since I will hire a property management company, that's a further 10%: $3488-$348= $3140 per month.  Based on the difference between the mortgage payment and rent, I can come out ahead by several hundred dollars.

As for the cap rate, using a caprate calculator, 523,000/41460, 35% operating expenses, 5% vacancy rate= 4.9% caprate, bringing at 30% operating expenses, that's 5.3% caprate.  Even with those numbers, I will come out slightly ahead.  I guess the key here is to wait until interest rates go down by several points in order to make the numbers more manageable, preferably down to 5%.    

These are still rough numbers and I know I'm probably missing something or multiple items. Your input would be greatly appreciated.  Thanks.   

Hello BP Community,

I have been a residential investor for the last 10 years with a small portfolio of 5 properties, in TX and OH, a mix of SFH and duplexes. I've decided to take the next big step and scale up even higher. I'm pulling profits from my stock market holdings and pivoting to commercial properties, specifically in the Dallas/Fort Worth area. After having lived in TX for over 10 years, I've seen such tremendous growth in that state. And the pandemic has seen more growth as people have flocked there. From my research, the barrier to entry for commercial properties is enormous. Not your run of the mill residential investment. You need a couple of hundred thousand dollars for a down payment for just a single unit but the profit is huge and you don't need to deal with individual persons (and drama), just a business that sign multiyear leases.

A friend of mine, one of my former Soldiers, is currently a realtor there, and has been sending me listings, around the top suburbs of the Dallas/Fort Worth metropolitan area. I spent this past Saturday learning what a triple net lease (NNN) was (wish individual renters were subject to this), price per square footage (where is the monthly rent?), and focusing on a specific commercial property. That would be professional services such as a law firm or tax preparation and medical services such as dental, physical therapy, or a general practice. I've ran the numbers and they manage to be favorable, profitable, despite the high interest rates (I can always refinance in the future). My next steps are to find a bank, a property management company, and set up an LLC in TX as I don't want to be the owner, the LLC will be the owner and me as it's sole employee for now (and receiving a W-2 in the process). I'm hoping to purchase my first one by the late fall.

Apologize for the long post.  For those with commercial properties, what advice would you offer to someone just starting off?  Thanks!

@Conner Olsen

Mind if I call you for more info and research?

Tim Rostro

@Paige Miller

Hello,

I know this is an old post with only one reply but did you ever get any information concerning this?  I have a 4 bedroom/2 bath house in Euclid, OH that will be free in a couple of months and thinking of doing the same thing, renting to travel nurses or traveling medical personnel, by the room.  Cleveland Clinic is rated as the #2 hospital in the world.  I talked to my property management company about this and should be getting further information from them if they are capable of doing this as this is a short term rental.   

Hope everything works out for you.

V/R,

Tim Rostro