Chris major differences:
1. Loan to Value % higher. Finance terms- 5 usually, to 7 balloon period. Amort period 20 to 25 years. Construction loan interest only, Rent up phase interest only versus straight to P/I payment.
2. Generally larger dollars.
3. Zoning. And infrastructure. Normally pre-existing in SFH/MFH.
4. Insurance, triple net, Property tax, EPA concerns, etc.
5. Decide on your investment type. CRE can be almost anything. Dental offices, bowling alley, warehouse, restaurants, self storage, land development, etc.
6. As mentioned above people tend to invest in what they are comfortable with, housing.
7. Contractors. You're a small minnow in a big pond. Even if your big in your world, your small when it comes to contractors and tend to be more of a one-off deal versus if you own 20 houses or MFH units. Same as mentioned with Realtors above. If you need a house repainted or flooring replaced, you probably can find several people and schedules. If you need a Storm drain installed or Office walls torn down and replaced, fewer contractors and you have to fit their schedule since you're a small player. You have to plan farther ahead.
8. Valuation based more on CAP rates and Lease terms if any, versus comparables.
You are in a great large market, thus tons of opportunities, just have to figure out your niche. If you're really interested recommend you do the normal podcasts, books, seminars. But I would use this community and do some deal analyses. Go to Loopnet Los Angeles Commercial and Industrial. Look through the many types of properties and businesses and take a look at some niches. Bring the analyses back to this forum and ask for input. Do that about 3 times, then narrow down on a specific niche. Since this is a competitive market, you need to bring something different to the table, more of a Developers eye. Everyone can see a Medical office and think Medical office. But can you see a dumpy old industrial property and see a Medical office. That is where the money is, and also greater risk.
Appreciation versus return %. Either way you need to meet your CASH FLOW. From what I can tell California is an Appreciation play versus a return % investment. With that said, I like to make my money or appreciation up front and not wait on it. You also need to look at the investment but also everything around it.
Saw a horse stable in the middle of Los Angeles for sale. Definitely some value add there.
Palmdale is a little away, cheaper and zoning is more amicable. How can I marry Palmdale to Los Angeles? You don't have to be in Los Angeles to feed off the Los Angeles market.
Hope to see some deal analyses from you.
Our latest deal below. Most people see a bad farm. 75 acres with only 50 acres tillable and 3 little fields to move your big equipment into. I see two large dams and ponds. About 20 housing sites. The key to this deal is driveway entrances. If we can't get approved or make it work, we only get 12 lots. Which we make a little money, but not worth the risk. If we get 20 lots, this is a great deal.
Developer- potential high returns, but also high risk. I would tell people it is a very bad time to start a housing development. But I see a different market than most people will see. Who is right, don't care. We are putting our money down and taking on the risk. Point is you need to live and die with your decisions, don't blame other people. Do your research and then make a commitment.
