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Commercial Retail as Investments


murcivu
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Fortis definitely food for thought, I've always wanted to make RE my day job. Truth be told I'm just not seeing the numbers, but your right I need to get serious and actively seek out commercial rehabs. I think I've peaked in resi.

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Fortis definitely food for thought, I've always wanted to make RE my day job. Truth be told I'm just not seeing the numbers, but your right I need to get serious and actively seek out commercial rehabs. I think I've peaked in resi.

 

It's a full time job or two jobs sometimes, you need connections with good RE agents to feed you good deals, it takes years to establish, commercial is a completely different animal.

 

Good Luck

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  • 5 months later...

Fortis, one of the best insightful posts I've read in a long term. When next over East will have to take you out for coffee and chat, if your available.

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I actually forgot about this thread, the development I am mentioning at the beginning of the thread is completed, hand over to my tenant will be on the 16th of this month.

 

What a crazy ride, it would make for a good story,I will try to put something together for you guys since I kind of almost promised :icon_mrgreen:

 

I need a bit of time.

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Great thread. I haven't managed to snag anything, but still looking. There's so much free money flying around the number make no sense.

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Great thread. I haven't managed to snag anything, but still looking. There's so much free money flying around the number make no sense.

 

 

Commercial is something I have wanted to get into for some time. Do you care to elaborate on your methods of finding a good ROI? Any info would be greatly appreciated.

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  • 2 weeks later...

Pretty funny that I came across this thread. I was going to start one in hopes to speaking with some of you who purchase commercial RE. If you do please PM me I have some questions. Especially if you are in the NJ, NY, PA, CT area!

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  • 2 weeks later...
Pretty funny that I came across this thread. I was going to start one in hopes to speaking with some of you who purchase commercial RE. If you do please PM me I have some questions. Especially if you are in the NJ, NY, PA, CT area!

It's still a shaky market here in NY

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  • 3 months later...
Fortis,

 

Thanks for the useful posts in this thread. It seems like you have been doing this for 20+ years.

 

I wish, but not old enough for that, land was much cheaper and easier to find 20 + years ago, now it's all gone and if you find any it's almost impossible to buy, I started approx 14 years ago, better late than never :)

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It's still a shaky market here in NY

 

:iamwithstupid

 

Be cautious buying now, there is a lot of inexperienced capital chasing deals. We were looking at Target Anchored center a while back (Target NAP) here in Socal with many good credit national tenants (Chipotle, 5 Guys Burgers, etc). I received a full package from one of the top brokerage firms in the nation and the package was lacking comparable rent (in addition to many other basic items that are included in a full package). Many of the rents were highly inflated compared to market comparables ( I did my own survey). I asked the broker on why there was not basic rent comps included in this full 30 page packet and his responses was I need to use the rent comps that are in the existing center, which is ludicrous. I pushed the matter with him on rent comps should be on surrounding/competing properties and his response was short and abrupt and he said "no you should use the ones we give you". I used to broker with one of the top commercial firms in the nation and know the basics of commercial brokerage. In this paticular property rent comps in the area were about $1.65 and they were using roughly $3.20 +/- on certain tenants (if memory serves me correct). At any rate property value was over inflated IMO by a good 4 million dollars by their rate spread. Again there were quite a few new tenants in the center but it seems a few of these tenants their sales were lack luster and would have left once their initial lease expired. Someone bought the center and I can guarantee you it was an uneducated buyer that will have problems in a few years.

 

In addition many of these larger centers do not have a price listed, it is "final and best offer". They give you an inflated rate spread on top of that.

 

At any rate we have completely pulled out of the market for retail acquisitions. It was a complete waste of time maintaining contact with all the brokers, looking at all the packages for crap properties and once you finally think you find a good deal/spend time doing your due diligence you find out it is a waste of time.

 

Bottom line, there are too many hedge funds, inexperienced and foreign buyers that are polluting the market. Your location/parameters might be different nonetheless be cautious, evidently these big brokerage firms are marketing to this uneducated segment.

 

Im not saying there arent good deals to be made just educate yourself and dont rely on the broker to provide with all information needed.

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Money is made in developing not really buying existing tenanted developments which you'd have to buy on return, every mom and dad, super-funds, hedge funds, average investors will be your competition. That's purchasing at the retail end of the market, generally in business if you want to make money the rule is to place yourself at the wholesale level.

 

You must have your own broker who works for you and get them to do the dirty work, you need to build relationships in order to get things offered before they reach the market, once stuff is advertise it was already rejected by preferred buyers, I bought/buy a lot and none of my stuff was on the market, it was either offered to me before marketing commenced or I chased it down myself and convinced the owner to sell.

 

My rule #1 is that I always meet the vendor/s and negotiate face to face, it helps when you can sell ice to Eskimos.

I have to use my strengths where they count, no disrespect to the brokers out there but if the broker was as good as I am he would be sitting where I am, if they refuse I walk no questions asked, I use brokers only for introductions, I generally don't allow them to interfere with the negotiation process, I had deals burnt by stupid things said by brokers during negotiations so I personally do all the negotiations, acquisitions, sales, leases.

 

When I purchase I always do 100% of the due diligence before I approach the owner/vendor, when I go in I already know my worse case scenario and I am ready to strike, best deals are always done on the spot, not a very good idea to give people time to think, I offer very clean contracts 99% of the time cash with no conditions, I don't mind paying a touch over what the market supports at the time of the offer, I know what I am buying and I always look long term, with that strategy if I see something I want it's mine, no questions about it! Almost every time I bought something I had people telling me I've paid too much, once I was done with it every single one of them told me what an awesome deal that was LOL, what you do with it is what counts and I only know what's in my head before I make my decision to purchase.

 

In terms of commercial RE purchasing strategy, I would NEVER buy anything existing which would not support value add, I either buy raw land which is extremely scares now unfortunately, existing buildings which I demolish, etc. I buy two to three years ahead which means I will always have "blank canvases" which I market ahead of time, I get my own tenants and work out my own deals, the bonus of being in the market so long is that now tenants approach me for design and construct premisses, much easier than speculating.

 

D&C is brilliant because the customer comes to you with a requirement wanting customized premisses not readily available on the market, that's when you control the deal if you have the realestate, reputation and know-how, best case scenario for an investor/developer.

 

My last customer signed for 25 years with guarantees in place that I would actually be happier if he leaves :icon_mrgreen: J/K they are a great bunch of guys and we have an excellent work relationship.

 

I can talk about this forever :icon_mrgreen: but I am on my iPad.

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This is fascinating. Thanks Fortis! I'd ask for an internship but I think there's a geographical problem... Any advice for a college grad would be greatly appreciated!

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Money is made in developing not really buying existing tenanted developments which you'd have to buy on return, every mom and dad, super-funds, hedge funds, average investors will be your competition. That's purchasing at the retail end of the market, generally in business if you want to make money the rule is to place yourself at the wholesale level.

 

You must have your own broker who works for you and get them to do the dirty work, you need to build relationships in order to get things offered before they reach the market, once stuff is advertise it was already rejected by preferred buyers, I bought/buy a lot and none of my stuff was on the market, it was either offered to me before marketing commenced or I chased it down myself and convinced the owner to sell.

 

My rule #1 is that I always meet the vendor/s and negotiate face to face, it helps when you can sell ice to Eskimos.

I have to use my strengths where they count, no disrespect to the brokers out there but if the broker was as good as I am he would be sitting where I am, if they refuse I walk no questions asked, I use brokers only for introductions, I generally don't allow them to interfere with the negotiation process, I had deals burnt by stupid things said by brokers during negotiations so I personally do all the negotiations, acquisitions, sales, leases.

 

When I purchase I always do 100% of the due diligence before I approach the owner/vendor, when I go in I already know my worse case scenario and I am ready to strike, best deals are always done on the spot, not a very good idea to give people time to think, I offer very clean contracts 99% of the time cash with no conditions, I don't mind paying a touch over what the market supports at the time of the offer, I know what I am buying and I always look long term, with that strategy if I see something I want it's mine, no questions about it! Almost every time I bought something I had people telling me I've paid too much, once I was done with it every single one of them told me what an awesome deal that was LOL, what you do with it is what counts and I only know what's in my head before I make my decision to purchase.

 

In terms of commercial RE purchasing strategy, I would NEVER buy anything existing which would not support value add, I either buy raw land which is extremely scares now unfortunately, existing buildings which I demolish, etc. I buy two to three years ahead which means I will always have "blank canvases" which I market ahead of time, I get my own tenants and work out my own deals, the bonus of being in the market so long is that now tenants approach me for design and construct premisses, much easier than speculating.

 

D&C is brilliant because the customer comes to you with a requirement wanting customized premisses not readily available on the market, that's when you control the deal if you have the realestate, reputation and know-how, best case scenario for an investor/developer.

 

My last customer signed for 25 years with guarantees in place that I would actually be happier if he leaves :icon_mrgreen: J/K they are a great bunch of guys and we have an excellent work relationship.

 

I can talk about this forever :icon_mrgreen: but I am on my iPad.

 

Fortis, thanks for the great insights that you have shared regarding CRE.

 

Your probably focusing in the US market when writing this texts, but there are some pieces of knowledge that you put out, that can be used worldwide.

 

I'm working on RE projects in Africa and Middle East at the moment and making the proper adjustments to the local markets, everything that you said is applied.

 

When you mention the importance of having a construction company in the value chain, are you referring to a company that executes infrastructures and buildings, or a company that does the construction projects management (dealing and supervising with construction companies, contractors and suppliers) and works on renovations and maintenance of the properties?

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Fortis, thanks for the great insights that you have shared regarding CRE.

 

Your probably focusing in the US market when writing this texts, but there are some pieces of knowledge that you put out, that can be used worldwide.

 

I'm working on RE projects in Africa and Middle East at the moment and making the proper adjustments to the local markets, everything that you said is applied.

 

When you mention the importance of having a construction company in the value chain, are you referring to a company that executes infrastructures and buildings, or a company that does the construction projects management (dealing and supervising with construction companies, contractors and suppliers) and works on renovations and maintenance of the properties?

 

He is in Australia.

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:iamwithstupi

 

Bottom line, there are too many hedge funds, inexperienced and foreign buyers that are polluting the market. Your location/parameters might be different nonetheless be cautious, evidently these big brokerage firms are marketing to this uneducated segment.

 

Foreign buyers are polluting all the RE markets, I see residential and commercial listings artificially inflated because of them. :eusa_wall:

 

 

 

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Fortis, thanks for the great insights that you have shared regarding CRE.

 

Your probably focusing in the US market when writing this texts, but there are some pieces of knowledge that you put out, that can be used worldwide.

 

I'm working on RE projects in Africa and Middle East at the moment and making the proper adjustments to the local markets, everything that you said is applied.

 

When you mention the importance of having a construction company in the value chain, are you referring to a company that executes infrastructures and buildings, or a company that does the construction projects management (dealing and supervising with construction companies, contractors and suppliers) and works on renovations and maintenance of the properties?

 

The rule is generally the same no matter where you are.

The construction company is used to construct your own infrastructure and assets, that way all the control is with you also that will make you understand all facets of the business.

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Foreign buyers are polluting all the RE markets, I see residential and commercial listings artificially inflated because of them. :eusa_wall:

 

I see that as a benefit, look at what they buy and position yourself in the chain above them turn around and on sale at a premium, by your own admission it sounds like they are easy targets and pay through the nose, I fail to see the issue here.

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Only benefits one side, if you are a real buyer and long term owner then you will be over paying; which imo is not a balanced market.

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Only benefits one side, if you are a real buyer and long term owner then you will be over paying; which imo is not a balanced market.

 

You have to adapt your strategy to the market, the market doesn't do what is best for your personal situation.

 

Fortis is saying, try to spot where things are headed and buy before the masses get there.

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Fortis has great advice and I do stop and listen to what he has to say for sure, maybe deep inside I don't like the idea of people from a communist country buying up our land instead of our products.

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maybe deep inside I don't like the idea of people from a communist country buying up our land instead of our products.

 

It's cyclical, well at least history has shown it to be.

 

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He is in Australia.

 

I don't know why I always thought fortis was in Canada.

 

Do you typically buy undeveloped land and build a empty shopping strip with intention to sell to someone or do you keep it and try to lease out to tenants yourself?

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