commercial real estate

I got the question the other day, “where do I go to raise $50 million to create a distressed properties fund?”

Is may sound snide, but I’m thinking, “if you have to ask…maybe you’re not ready to manage $50 million yet?” My observation is that those who have a track record of success acquiring property, creating value and generating excellent returns for their clients do not have difficulty raising money. Do you have experience buying distressed property and profiting? If not, perhaps you need to look at starting smaller. If you have a modest amount of this experience at a smaller level, a good way to “level jump” is through a one-off joint venture with an equity source on a single larger acquisition. A typical deal structure for these JVs will have you putting up 5% of the equity and the partner putting up the rest. Partner gets a preferred return, you benefit from a large part of the upside. Partner gets control over major decisions, you get to run the asset day-to-day and benefit from associated fees.

The pool of commercial lender owned real estate (or real estate owned - reo) Much foreclosed commercial property today was encumbered by a CMBS loan (i.e. securitized, conduit loan). When CMBS loans go into default, a third party called a special servicer takes over. There is a small handful of special servicers nationwide assigned the duties of working out troubled loans or if necessary taking them through the foreclosure process. You need to get to know the special servicers, ideally before they need you. the mortgage bankers association should have a list with contact information (mbaa.org). call each one, ask for the person dealing with “troubled loans” and real estate owned (reo) in your state. then “farm” them (to borrow from the residential parlance), calling or emailing them periodically and offering to help with market information if they need your help.

Here’s a how-to. Let’s say you’re going to start with duplexes….

I’d pick a particular neighborhood that interests you — or cal it a submarket. I’d build a conclusive database of duplexes and four-plexes in that neighborhood. This will take some driving around. pick small enough a geography to start off with so that you’re not overwhelmed.

For each property I’d track asking rental rates and availability - that will get you a vacancy rate and an understanding of market rents. I’d use tax record data — often search able for free on the internet — to gather comparable sale data and build a list of owners. I’d even take pictures. I’d dump all the information in a contact management program.

I’d start canvassing the owners of the these properties asking them if they’d sell. Phone is best but you start with an introductory letter if you like. Properties not marketed by a broker often sell for less!

Track their responses. Some sellers will be extremely unreasonable! It will take persistent and patient follow up, but I’ve observed new investors have a lot of success with one variation of this method or another.

There’s no magic easy method to finding deals, and focusing only on property listed with brokers is going to give you a lot of heartburn (agents are paid to get sellers the most money possible and most are good at it!)

I’m now using Act! as it is the only software my company supports. stay away! so slow, so buggy, very poor.

I formerly used REA! (www.gorea.com) and found it to be very nimble, fast, and functional for developing a relational database linking properties to owners, creating groups, and doing targeted marketing. I loved it.

When I was in REA, we tracked buyer criteria, linked property owners to their properties, tracked market information, and used “rifle shot” marketing to market off-market properties, etc.

It’s been years since I used REA so I can’t speak to their current version.

good luck!

again a linked in question, answered by me:

Here are three options to try. I haven’t used any but the costs aren’t too high so it might be worth experimenting with each:
www.TenantVerification.com

www.E-Renter.com

www.1-Background-Checks.com

If you’re a real estate broker (or any other kind of sales professional for that matter), you ought to google yourself periodically. Many if not most prospective clients are doing this to you. What does your internet presence look like? Anything embarrassing out there, from the obvious (provocative pictures) to lesser offenses? make sure you look good. This is the era of the instant background check.

My answer to a linkedin question:

The American Seniors Housing Association generates a range of reports that you might find useful, albeit at a cost.

Links:

• http://www.seniorshousing.org/Bookstore/

I use any number of means to market my commercial properties: costar, loopnet, google base, craigslist, washington post ads, direct mail, email blasts, cold calling, etc. etc. When it comes to selling buildings, there’s still nothing that beats brokers.

When I market empty buildings, I need to reach out to cooperating brokers. Larger users of space got successful by leaning on trusted advisers. They are represented by brokers 95% of the time.

When I market larger investment property, I start with my own relatively conclusive list of owners and investors across the mid-Atlantic. Once I’ve gotten the word out to that list, I expand my efforts to include the cooperating brokerage community.

Most of the buyers the internet brings me are still “small potatoes:” they might buy a $300,000 condo from me, but rarely are they in the market for that $10 million free standing warehouse. I’m not worried about being disintermediated yet (a word we real estate brokers made up I think). The process of buying real estate is still complicated…a lot more complicated than buying a stock.