All Forum Posts by: Zach Alms

Kim, if they have TI and leasing costs in as part of the raise amount I am guessing there is vacancy at the building or they are expecting tenant turnover. 

By raising for it on the front end they are preserving any positive cash flow or pref for the property, if it isn't part of the raise amount they would need to allocate a larger portion of the positive cash flow towards building up the balance for those inevitable costs.. which in turn would any pref or CoC for while. Depending on the size of the project this could be years.

The fact that they are preparing for these costs and accounting for them before the deal is even purchased is a good thing in my mind. 

I see you are from Iowa, would this leaseback be in Iowa or what general area? Feel free to reach out directly. I know some people that might have interest. 

@Liam Delumpa Outside of podcasts and YouTube there is not a lot of good resources out there for getting into commercial real estate. If you're not already following Tyler Cauble on YouTube I would check out his content. Otherwise there are some books out there worth reading but I can't pinpoint one or two being the most beneficial.. feel free to reach out directly and I can send you a list of the RE books I read in the 3-5yrs leading up to making the move from multi-family to exclusively retail strip centers now. 

Alex, 

1. OMs are not to be relied on, you'll want to do your own DD and confirm it is accurate. 

2. Hidden expenses you should look out for are roof, parking lot/sidewalk and possibly HVAC units. Sometimes these items are covered in a NNN lease but normally full replacement is not covered.

3. Just because it is NNN doesn't mean it will be completely hands off, unless you are hiring a property management company. You'll still need to set up and pay all vendor and service contractors, common area utilities, take calls or emails from tenants on any maintenance issues.. it's definitely a lot less work than being a hands on apartment owner/manager but I just don't want you to think that NNN is completely hands off.

Jeffrey, I'd be happy to connect as I am also in MN, but all my investing is outside of the twin cities metro. I've done and am doing both large commercial deals and small residential deals. My suggestion would start investing in whatever you are comfortable and familiar with, so commercial might be the way to go for you. The only main benefit of residential I see is that that barrier to entry can be smaller and easier. 

 You don't necessarily need to take the cash out in order to use your equity for you next purchase. As mentioned above, once you find a property you want to buy, you can just leverage the equity you have in your current property to use as your down payment on your new purchase. That way your aren't cashing out now and paying on a mortgage when you have nowhere to put that money you just got. 

Another option would be to get a Line of Credit secured against your current commercial property. 

In both scenarios you will have a lien against your current property but won't have to do a straight "cash out" and be holding cash that isn't earning you any return. 

Some local news that may answer your question. 

https://kstp.com/kstp-news/local-news/eau-claire-man-indicted-in-35m-bank-fraud-scheme/

I'm no lender, but I'd say if you have the equity then yes. You should be able to get a line of credit secured against your commercial property for up to 75 or 80% LTV (total for all loans). It might just take finding the right lender that is willing to take that second lien position unless you are talking to the lender that has your original mortgage. Good luck!

This is a good question and great way for someone to grow thier portfolio, the problem is that it typically doesn't happen overnight. In order to buy two properties for $600k with 20% down, you'll need $240k of equity. So the way to do this is buy property A for $600k with your $120k and significantly increase the value of property A. (Some good ways to do this could be to fill vacancy, raise rents, or lower expenses). You can also utilize the power of time and principle pay down over a period of time. So if property A's value never increases, you'll need to owe only $360k on that property in order to use the equity in Property A to buy another property worth $600k. 

Hope this helps a little bit! 

Lots of good books and podcasts out there to learn more on this. I'd be weary of investing other people's money until you have a solid knowledge base on the topic. 

I'd say a couple good books to start with are Brian Burke's - "The Hands-off Investor" and Joe Fairless - "Best Ever Apartment Syndication Book"