OK,
A friend of mine posed an opportunity to me whereas a local developer is looking to invest in mixed-use commercial properties using a buy & hold strategy within an area that is getting ready to see ALOT of improvements and rising property values in the comming months/years. Here’s the problem: I DON’T DO COMMERCIAL PROPERTY!!
Now, am i willing to turn down an opportunity to have a large credit line for investment? NO
Am i willing to jump into this without knowing what i’m doing? NO!
I have been racking my brain trying to come up with scenarios on commercial properties using my knowledge of residential properties and ITS NOT WORKING? I know commercial is a whole different animal altogether, but what should I be learning/looking for? The finance area is obvious, but how do I evaluate the properties to present to the developer? Are the formula’s similar to the residential formula’s we’ve learned on the forum so far?
To be clear, I DON’T expect an “education” right here on the forum but I was hoping someone could point me in the right direction. Thanks alot!
I work very closely with an investment group that buys and sells nice sized tracts of Mixed Use/Residential land. There are a wide variety of issues that are faced when dealing with commercial property. The key is Due Diligence. We are actually closing up funding raising on a property in a very high growth area. It is 59 acres with future land use of mixed use. Out of the $1.6 mil needed to raise, we lack only about $100,000. We are buying at 1.71 a sq ft and are anticipating a mid-term investor to pick it up for at least 7-8 dollars a sq ft. with in 2-5 years, or an End User who will typically pay 15-18 a sq ft. Good luck with you investments!
Michael Davis
i have a hand full of spread sheets i built myself to evaluate development deals.
I broke my mixed use one up into several areas - apartments, retail, medical, storage, resturant, gas stations etc
I would recomend you building a spread sheet with this idea in mind. Make sure you figure a way to estimate all of your soft costs as well.
Normally i would look for a site i could cut off enough affordable housing lots to pay down the debt or atleast cash flow the property. I wouldn’t plan to hold the property unless I could cut off enough lots to pay for the property.
it takes a lot of time and research to build your template that works for your situation but once you do you can evaluate a property very quickly.
I do this for every different property type I become intrested in. I get normally 5-7 properties a day and can useually evaluate the ones i’m intrested in fairly quickly if I have all of the information.
i evaluate everything based on the returns - I think this is what you would need to do as well.
jason