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Retail Strip Center Sold

SteveO

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I should probably wait a week or two before posting this. But, I am sitting in front of my computer with a bit of free time.

I am about a week from selling my commercial property. There are many mixed emotions as I originally thought this was my retirement. Plans change though.

The golf course takes a lot of time. That is where I need to spend it though. The retail center requires less time but it is a three hour drive away not counting traffic. So, I can easily have a 10-11 hour day and only get 3 hours of work in. Also, a 30 minute project becomes a full 8-9 hours with traffic, food and such.

I used to be able to hire projects out to handymen and others but they don't seem to have time anymore. The economy has taken away the ability to get easy help.

There have been plenty of issues over the last year as well.

Anyway, the decision was made. It should close with a gross of just over 4M. I paid 2.3 about three and a half years ago. Had to put a few hundred K down so the returns are about where I like them to be. Close to 100 percent per year. Taxes will reduce that though.

The golf course is doing well. This will allow me to focus on that and the home build.
 

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RazorCut

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Good decision mate. Onwards and upwards.
 

Sauce

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I remember you showing the property to me a few years ago when you first bought it and it was partially vacant. Glad it has worked out for you. You added a tremendous amount of value to my life, and that meeting with you set in motion a huge change in my life that I will never forget.

The nex question becomes, what are you going to do with the gains? Take the tax hit or try and find another property to roll in to and 1031x?
 
OP
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SteveO

SteveO

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Selling is good thinking. What's next? Are you investing in more real estate?
Thanks. I'm going to sit on the sidelines for a while. Too many buyers.

Someone called me from Phoenix to ask about an apartment deal. They were looking at a place that they wanted to purchase. The deal was close to 150K per unit. They wanted to renovate and sell for 250K per unit.

I reminded him that 8 years ago, I had purchased the property across the street for 25K per unit. I also told him that someone was going to end up with the "hot potato".

I recently saw a retail center that looked to be around 25k sq ft sell for 1.5M. It is on a freeway exit. Lots of parking. I would have bought that if I had seen it. So there are deals around on occasion. This one was being sold by an 80 plus year old that is liquidating.
 
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SteveO

SteveO

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I remember you showing the property to me a few years ago when you first bought it and it was partially vacant. Glad it has worked out for you. You added a tremendous amount of value to my life, and that meeting with you set in motion a huge change in my life that I will never forget.

The nex question becomes, what are you going to do with the gains? Take the tax hit or try and find another property to roll in to and 1031x?
Well it was fun hanging out with you that day. Glad that I could be a positive impact.

I filled the empty spaces with an optometrist and restaurant. 100% occupied and cashflowing well.

I'm going to take the tax hit and sit on the money for a while. I have a 40 acre lot split to work through and the golf course to focus on for now.
 
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SteveO

SteveO

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Awesome Steve! Keep us posted on all your shenanigans, I can't get enough
Seems like you can get enough with the new baby and all. :)
 

MJ DeMarco

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I reminded him that 8 years ago, I had purchased the property across the street for 25K per unit. I also told him that someone was going to end up with the "hot potato".
I'm sure your experience in the 2006 market crash has definitely come into your decision analysis.

Congrats on the sale.

For casual observers, the "hot potato" you mention is actually a real cognitive phenomena...

Greater Fool Theory
 

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WJK

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Thanks. I'm going to sit on the sidelines for a while. Too many buyers.

Someone called me from Phoenix to ask about an apartment deal. They were looking at a place that they wanted to purchase. The deal was close to 150K per unit. They wanted to renovate and sell for 250K per unit.

I reminded him that 8 years ago, I had purchased the property across the street for 25K per unit. I also told him that someone was going to end up with the "hot potato".

I recently saw a retail center that looked to be around 25k sq ft sell for 1.5M. It is on a freeway exit. Lots of parking. I would have bought that if I had seen it. So there are deals around on occasion. This one was being sold by an 80 plus year old that is liquidating.
This is my 5th business cycle in the real estate business. I started in 1976. I'm head-shy about buying when the market is up this high. It doesn't make financial sense to me. How can you make money or even break even when the market is that high? How can you make a reasonable return on your money? You're smart to wait for the right deal to reinvest.
 

MTF

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Congratulations! Now you can finally retire and start doing nothing.

Haha just kidding. Good luck with your golf course and home build.
 

100k

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Congrats on the deal and making all that $$$ from it :).

Would you mind sharing some of the things you did to turn it around, what did you do to add value, how did you find new tenants, increase rent etc.

Cheers in advance.
 
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SteveO

SteveO

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Congrats on the deal and making all that $$$ from it :).

Would you mind sharing some of the things you did to turn it around, what did you do to add value, how did you find new tenants, increase rent etc.

Cheers in advance.
The center was half occupied when I bought it. It was in an incredible location but had a stigma associated with lease issues. The leasing agent told me that the owner was the issue and that he could have had it leased up. I went with that. He brought me two fantastic tenants which filled the property up.

Took two years to complete.

I was going to hold it but small issues were difficult to deal with.
 

WJK

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The center was half occupied when I bought it. It was in an incredible location but had a stigma associated with lease issues. The leasing agent told me that the owner was the issue and that he could have had it leased up. I went with that. He brought me two fantastic tenants which filled the property up.

Took two years to complete.

I was going to hold it but small issues were difficult to deal with.
Some of the national chain tenants looks for vacant, well located, neighborhood strip center since the malls are no longer pulling retail traffic. Most investors want everything occupied with a reliable income stream. It sounds like this property fell in the middle with only being half occupied. The reputation is another factor that helped you. YOU DONE GOOD!
 

MJ DeMarco

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Did you pick up any cigars from your tenant after closing??? ;)
 

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OP
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SteveO

SteveO

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Did you pick up any cigars from your tenant after closing??? ;)
They did not like me very much. I was a steady nag about running their vent system. I actually set up a spot in the utility room so I could see if they were running it. They would tell me over the phone that it was on when it wasn't. That changed when I was able to call them on it.

They probably charged me extra for the cigars.
 

21elnegocio

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Thanks. I'm going to sit on the sidelines for a while. Too many buyers.

Someone called me from Phoenix to ask about an apartment deal. They were looking at a place that they wanted to purchase. The deal was close to 150K per unit. They wanted to renovate and sell for 250K per unit.

I reminded him that 8 years ago, I had purchased the property across the street for 25K per unit. I also told him that someone was going to end up with the "hot potato".

I recently saw a retail center that looked to be around 25k sq ft sell for 1.5M. It is on a freeway exit. Lots of parking. I would have bought that if I had seen it. So there are deals around on occasion. This one was being sold by an 80 plus year old that is liquidating.
How do you know what commercial. Holding is a deal ?

I am in real estate here in Phoenix and SFR townhomes, duplex, fourplex are easy to spot. Been building capital to eventually get into commercial world but how do you k ownwhat to buy ?


Sent from my iPhone using Tapatalk
 

21elnegocio

WholeFlips Wholesaling Houses Virtually
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Feb 28, 2012
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The center was half occupied when I bought it. It was in an incredible location but had a stigma associated with lease issues. The leasing agent told me that the owner was the issue and that he could have had it leased up. I went with that. He brought me two fantastic tenants which filled the property up.

Took two years to complete.

I was going to hold it but small issues were difficult to deal with.
What were the small issues if you don’t mind me asking ?


Sent from my iPhone using Tapatalk
 

21elnegocio

WholeFlips Wholesaling Houses Virtually
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Feb 28, 2012
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Final question how can I that I have never got a commercial loan get a loan like that ?

How much do you need to put down ?

Does buyer pay closing costs ?

Are closing costs 3% like on a single family ?


I do have a cash flowing business bringing six figures every two months or less sometimes.




Sent from my iPhone using Tapatalk
 
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SteveO

SteveO

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What were the small issues if you don’t mind me asking ?


Sent from my iPhone using Tapatalk
Maintenance, tenant issues, parking, inspections, fire alarm. Stuff like that
 
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SteveO

SteveO

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How do you know what commercial. Holding is a deal ?

I am in real estate here in Phoenix and SFR townhomes, duplex, fourplex are easy to spot. Been building capital to eventually get into commercial world but how do you k ownwhat to buy ?


Sent from my iPhone using Tapatalk
Just like purchasing a fourplex. Location, tenant desirability, etc. Evaluation is done by the same financial calculations.
 
OP
OP
SteveO

SteveO

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Final question how can I that I have never got a commercial loan get a loan like that ?

How much do you need to put down ?

Does buyer pay closing costs ?

Are closing costs 3% like on a single family ?


I do have a cash flowing business bringing six figures every two months or less sometimes.




Sent from my iPhone using Tapatalk
Talk to a commercial lender. The loans are easier to obtain than single family. All you need is for you and the property to meet certain criteria. The debt service coverage ratio needs to be at least 120%. This simply means that the net income is 20% higher than the mortgage payment. You will also need to have enough cash reserves to handle any turnover and anticipated capital improvements. Plus your personal credit.

20% down or more depending on the product and the lender.

Closing costs are negotiated. Usually standard title and escrow are split. Lender policy will be on you. Agent costs are on the seller.
 

Owner2Millions

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Congrats @SteveO

I also would like to get into commercial real estate.

Its great to hear your commercial property actually cashed flow and it appears you made some nice money off the sale thanks to appreciation.

Do you have any thoughts of going commercial overseas? Are you planning to get into real estate development eventually? Is this your only venture within real estate? Real estate is such a huge industry and some people take those funds after a sale like that and start their own mortgage company, title company, realtor brokerage, home insurance company or whatever.
 
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SteveO

SteveO

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Congrats @SteveO

I also would like to get into commercial real estate.

Its great to hear your commercial property actually cashed flow and it appears you made some nice money off the sale thanks to appreciation.

Do you have any thoughts of going commercial overseas? Are you planning to get into real estate development eventually? Is this your only venture within real estate? Real estate is such a huge industry and some people take those funds after a sale like that and start their own mortgage company, title company, realtor brokerage, home insurance company or whatever.
You can call it appreciation or whatever you desire. I call it value-add. I purchased a half empty building and filled it up. It was all part of a master plan. When people say "appreciation", my thoughts go straight to something different.

I have done a lot of value-add deals with apartments. I have done development on a commercial property in the past. I own a golf course also.

I am cashing out. May play with a few projects but cashing in the chips and playing for a while.
 

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