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has anyone invested in CRE (commercial real estate) before? I've got some money I was going to use for a home rental and am thinking of buying office space for rent instead. would love to hear your experiences, pros/cons etc. I was going to meet with a couple CRE brokers this week to find out more. if anyone's interested in me posting my journey let me know too. I'm also based in Honolulu FYI. cheers.
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May 9, 2016 00:15
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| # ? Apr 25, 2024 10:30 |
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Im not an expert, but I have an office space as part of a triplex I own as well as a stand alone office space. I also partener with a commercial real estate broker who works for CB Richard Ellis who throws some info my way when I have questions. What kind of real estate do you want beyond commercial? Your options are typically warehouse, retail, or office space. I know less about retail and warehouse and just a bit more about office, but il try to help. Congrats, youre now competing with people who are doing all cash deals (and reits) to buy these places and typically have analysts who know their poo poo. You're less likely to find "deals" and more likely to pay what the market dictates. Also, if you do finance, you need a commercial loan. This means your interest rate is going to be higher (slightly) and you can only lock in a rate for 5-10 years. This isnt a terrible thing because refinancing regularly is an easy way to roll equity into another investment (and lock down interest rates if it is so favorable). You most likely are going to have to retain a broker to keep your space filled. You could try to do it yourself, but busineses typically dont search craigslist for office space. This is going to cut 4% off the gross (drat, it might be 2% i cant remember if both renter and lessor split the fee) for the first x amount of years then a reduced rate afterwords until it goes to zero. Also, you need to have cash on hand to do build outs for new tenants. If you dont have it, many businesses will tell you to gently caress off. No one wants to pay to rent and then dump cash to outfit the office space, no matter how much of a beating you take on rent. Rents are based off of square footage and office space is bad rear end because its typically triple net, where the rentor pays rent, utilities, and RE tax(on their, non shared portion of the building). Obviously there are sub catagories to all of this stuff and buying a space isnt just cut and dry. Brokers rate their properties as "c", "b", "a", and "trophy a" based on how new, nice, shiny, and cool the property is. How much money are you playing with? Why do you want to do commercial over residential?
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May 9, 2016 09:23
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I work as a landlord representative in commercial real estate, I negotiate with the tenants (Retailers and office users) in greater Boston. My belief is that it's extremely difficult to get started in CRE with one property. You tend not to see these types of investors as owners, they usually inherited their property or own as part of some investment group. You would have to invest a lot of money to get started, and your risk would then be horrifyingly undiversified. There are a ton of things to worry about that could cost you a lot of money at any time (ADA complaints, responding to discovery on slip and falls, zoning and local politics issues, working with your lender, broker, lawyers, etc.). It can be a lot easier to get started with multi family residential, because the cost of entry is often so much lower. Unless you are very wealthy, it's hard to get effective management and risk diversification in CRE. I suggest you investigate investing in REITS, or a REIT index fund, vanguard has a good one. You can get REITs by sector if you want, so you could be in just retail, or all commercial, or all real estate categories.
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Jun 2, 2016 21:41
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Is there like a zillow for commercial real estate? I day dream about buying up office space in Houston and watching it gentrify around me and I'd like to see how much money I need before I can go about losing it all
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Aug 11, 2016 18:45
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What about CRE as an investment as far as like large apartment buildings? I have some real estate experience and I own 3 rental properties currently and have flipped a few houses but I'd like to honestly just have like one 8-12 unit apartment thing if possible at some point because I figure there's decent economy of scale as far as the pricing, and it might be easier to get it professionally managed by someone competent than it would be for just like one house.
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Aug 11, 2016 21:07
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Bonham posted:Is there like a zillow for commercial real estate? I day dream about buying up office space in Houston and watching it gentrify around me and I'd like to see how much money I need before I can go about losing it all It's called CoStar and it's expensive as gently caress. Commercial RMLS is also an option; less expensive and less good. Stefan Prodan posted:What about CRE as an investment as far as like large apartment buildings? I'm a commercial real estate appraiser and all I do is apartment properties. I would never consider owning anything under 40 units because that's the point where an on-site manager pencils out. If you've got an 8 to 39 unit complex, you either pay a management fee (5% to 10% of your effective gross income) that slims your returns and still leaves you with a lot of work to do, or you hire an on-site manager that guts your returns to nothing. If you manage it yourself, it's not passive income anymore, and being a landlord is a truly heinous job. You wouldn't believe how often people are late with rent because their children have AIDS and they got fired from their job and their mom passed away etc. Also once you hit ~50 units, all your capital expenditures like new roofs, parking lots, unit updates and such can be paid from the property's cash flow rather than taking out loans or dropping big lumps of savings. If your budget is under $4M, just buy an office/flex/industrial building instead. Higher net income, fewer tenants, no laundry machines to repair at 2 AM when a tenants' baby filled it with rocks.
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Aug 11, 2016 21:39
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Does 10% really gut your returns that bad? For instance, I have a duplex where my costs per month are like $900 including repairs and it takes in $1420 in a month in rent. I manage all my stuff myself but if I had to pay an extra $140 a month it seems like it'd still be not awful income-wise. I guess in bigger apartment complexes you have more turnover and more people treating the place like poo poo though so your expenses might be higher?
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Aug 11, 2016 21:43
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Stefan Prodan posted:Does 10% really gut your returns that bad? For instance, I have a duplex where my costs per month are like $900 including repairs and it takes in $1420 in a month in rent. I manage all my stuff myself but if I had to pay an extra $140 a month it seems like it'd still be not awful income-wise. I very intentionally used "slims your returns" for that example. A $142 management fee would actually be 28% shaved off of your net income. At that point, it seems (to me - and this is a very personal opinion) that the property isn't likely to perform any better than a less risky (again, totally personal opinion) stock portfolio. Larger communities have higher total expenses but (typically) lower per-unit expenses.
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Aug 11, 2016 22:15
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| # ? Apr 25, 2024 10:30 |
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Yeah I guess I just figured the per unit return on a bigger place was better than on 1-4 unit places to that might cancel out some of the loss from having to hire a manager.
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Aug 11, 2016 23:04
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