It’s been a while since I posted something to this topic. July I think. Mostly because I’ve found that when dealing with adults in commercial real estate the deal process is about as exciting as watching paint dry. And I hate painting.
So let me bring you up to speed.
We last left this thread with my last deal dead and me starting the lawsuit process for the return of my earnest money deposit. Well if you can believe it, this hasn’t been resolved yet. The reason? Mr Seller, being the third grader that he is, is ducking the process server. So I’m still chasing him for his signature. But on the bright side, Mr Drama Queen is now in a world of hurt. Now I’m (generally) not someone that revels in the misfortune of others, but in this case I’m making an exception. You see, in anticipation of selling the building to me, he refinanced the building and took on a commercial mortgage with an interest rate that resets daily, and with all the volatility in the credit markets his interest rate is now so high that his building isn’t generating positive cash flow for him any more. I’m really broken up about this as you can tell. 🙂
The good news is that I have made progress on another building that I first looked at back in April. This one is located near the GM Tech Center in Warren, and there’s a lot to like about it.
First is the location. The Tech Center is a good area to be near, because it’s probably the last GM facility that will close if they continue their collapse and walk away from the Ren Cen. Second, it had an assumable (for no fee) 15 year low-interest land contract with no underlying mortgage, and third it was being managed less than efficiently by an owner that had reached the point of wanting to retire, so there is some low hanging fruit to boost ROI performance.
Much to my surprise this process has moved along completely drama-free except for a couple of small mistakes and mis-communications.
We agreed on price. The inspection went well with no major issues arising. The Phase 1 environmental inspection was completely clean, and the financing is a breeze because of the assumable land contract. We’ve even filled a couple of vacancies as we have approached the close.
Now don’t get me wrong, there was a lot of tough back and forth negotiating along the way. Several disagreements, miscommunications, and mis-clarifications. But end the end it was a straightforward and unemotional process that was primarily focused, at least from my perspective, on the numbers.
As I mentioned before, I had always heard that commercial real estate was where the big boys and girls played. And this deal validated that belief pretty well.
I cross the finish line on October 29th at 10am.
Congratulations Dennis! I know you have been working on this a long time and you are finally going to enjoy the fruit of your labor. I, too, believe that the real money is in commercial real estate but it is not something you can just jump right into. I’m still “cuttin’ my teeth” on the residential side. But I look forward to learning from you and others who have traveled this same path so I can eventually jump out of the rat race.
Thanks Dave – it’s there waiting for you! I didn’t know squat about this when I started in February.
24 months. It starts Oct 29th.
Dennis, A much deserved congratulations! I applaud you for blasting through with enough courage to actually pull it off. You are right with your comment above, no extra special skills required if you just get past the fear of holding you back. I am not suggesting irresponsible behavior or minimizing the work required, but once we have investigated, done research, done Due Diligence, there comes a time when either you do it or you don’t. Perhaps the adage of look at (100) properties, do (10) offers, get (3) accepted and purchase (1) is accurate.
I started at this on my own going on six years ago, and after fourteen acquisitions, we have hundreds of proformas on file of buildings or properties we looked at, but passed on or our offers were not accepted. Looking at lots of property, analyzing proformas and financial data is the only way to get familiar and comfortable about the market.It is no easy task when you are juggling a couple of job responsibilities. I just started doing this full time last Thanksgiving. I worked full time and part time gigs while building enough of a base to sustain. Just drink more coffee and blast through.
So, once you have this one closed and stabilized, I encourage you to keep looking and building your portfolio, which I am guessing you are already doing. As always, should we be able to help in any way, give us a shout. Lots of folks helped me along the way and I am happy to be able to reciprocate
Eric – thanks for the kind words, the encouragement, and the counsel.