Need Advice from fellow pelican real estate moguls

[Eric Coffey]

Originally Posted by CalPersFatCat

No offense, but you may have won the "Captain Obvious of the Internet" award this week.

Well, no offense but my statement was targeted at the OP, who stated he was looking into his first commercial property/investment. I was just trying to be a bit diplomatic in response (counter) to your completely incorrect statement.

Any "investor" that bases an acquisition decision solely on cap rate is naive, and bound to get burnt. Cap rate is but one metric (that can be easily manipulated), and depending on one's strategy can be completely irrelevant.
It can also be proportional to the risk involved in many instances (high cap = high risk, low cap = low risk). Better to look at the complete picture, to include actual YoY NOI, CoC, vacancy rate, deferred maintenance, management performance/issues, etc. Sorry if that is a "Captain Obvious" response, but it does seem appropriate here.

Originally Posted by CalPersFatCat

Be advised, properties that actually sell at 2% caps in 2019 are not value add, unless all of the value is in the dirt...

Yet another incorrect blanket statement. Lots of reasons for under-performance, and cap can fluctuate dramatically, depending on several factors.
Not to mention, caps are at an all-time-low across all asset classes these days, primarily due to higher property values and the current (low interest rate) financial environment.
By all means though, please send me any/all OM's for value-add properties with double-digit caps that can be taken down on the cheap, lol...

[Eric Coffey]

Originally Posted by Cajundaddy

No way you want the current owner to continue on as a renter.

This is not your dream retirement property, keep looking.

After reading the OP's updated property info/intended use, I agree.

In addition to the "dirty" mechanics of the deal, being "on site" management, and/or living in the same property as (and sharing walls with) your tenants should be avoided at all costs, IMO.
Even being the sole occupant living in a multi-zoned property can be a recipe for misery, which can be compounded by the types of businesses the zoning allows.

I had a client that was considering a particular live/work property years ago.
Initial due diligence revealed that one neighbor ran some sort of manufacturing operation that was horribly loud, and another ran some sort of manufacturing operation that was horribly stinky.
Needless to say, that was a hard pass.

[CalPersFatCat]

Originally Posted by Eric Coffey

Well, no offense but my statement was targeted at the OP, who stated he was looking into his first commercial property/investment. I was just trying to be a bit diplomatic in response (counter) to your completely incorrect statement.

Any "investor" that bases an acquisition decision solely on cap rate is naive, and bound to get burnt. Cap rate is but one metric (that can be easily manipulated), and depending on one's strategy can be completely irrelevant.
It can also be proportional to the risk involved in many instances (high cap = high risk, low cap = low risk). Better to look at the complete picture, to include actual YoY NOI, CoC, vacancy rate, deferred maintenance, management performance/issues, etc.
Sorry if that is a "Captain Obvious" response, but it does seem appropriate here.

Yet another incorrect blanket statement. Lots of reasons for under-performance, and cap can fluctuate dramatically, depending on several factors.
Not to mention, caps are at an all-time-low across all asset classes these days, primarily due to higher property values and the current (low interest rate) financial environment.
By all means though, please send me any/all OM's for value-add properties with double-digit caps that can be taken down on the cheap, lol...

You are a blowhard. blah blah blah.

You have argued that the deal "might be" an okay deal for an undercapitalized first time RE investor considering a mixed use income producing asset in coastal california and that we are presumptive by issuing cautionary "blanket statements" about aggressively marketed properties for sale with a prospectus indicating a cap of 2%.

Why don't you post one of those beautiful, value add, multi-anythings, marketed as a 2% cap, in which the value was not in the dirt, that closed in 2017, 2018 or 2019.

Please don't encourage this fellow Pelican to hurt himself and his family. People have to live with their mistakes long after you earn your commission.

DL

[plexiform]

Thanks for all the replies. You’ve given me a lot to consider and research before taking this plunge. I am 46yrs old and work full time in the medical field. Taking this on would keep me working full time for at least another 15years maybe longer which was my plan anyway. But I certainly can not afford a major financial blunder at this stage of my life.

[McLovin]

As a real estate mogul, I say to stay focused on your day job.

[McLovin]

That is semi tongue in cheek.
But if the penciled out cap rate is really 2%, and you are talking about a +$1.5 million property, that’s scary as **** and makes no sense.

[Eric Coffey]

Originally Posted by CalPersFatCat

You are a blowhard. blah blah blah.

And you are an ignorant chump.

Originally Posted by CalPersFatCat

You have argued that the deal "might be" an okay deal for an undercapitalized first time RE investor considering a mixed use income producing asset in coastal california and that we are presumptive by issuing cautionary "blanket statements" about aggressively marketed properties for sale with a prospectus indicating a cap of 2%.

You have serious reading comprehension issues. I never said anything like that regarding the OP's specific deal. I was simply addressing the blanket statement you made, which was prior to the OP providing additional details.
Further, I gave it a pretty clear "no bueno" after a little more info was provided.

Originally Posted by CalPersFatCat

Why don't you post one of those beautiful, value add, multi-anythings, marketed as a 2% cap, in which the value was not in the dirt, that closed in 2017, 2018 or 2019.

I can, but I asked you first, princess. Let's see one of those "beautiful, value-add, multi-anythings" with double-digit caps.
You seem to be completely out of touch, as sub 3% caps are quite common with value-add acquisitions. They are also quite common as averaged "market" cap-rates for numerous markets (which can be used to determine comps via "market" cap rate). And again, it's just one metric...one that is affected (and weighted) by multiple factors, including intended exit strategy. And, if there is any scenario where cap rate is close to meaningless, it is a MFR acquisition with a value-add biz plan. Not to mention (as I stated earlier), margins are down across all asset classes, and especially multi-family. The total average for stabilized MFR is barely above 5% currently.
Not a bad thing per se, as it indicates high investor confidence, and high demand.

Originally Posted by CalPersFatCat

Please don't encourage this fellow Pelican to hurt himself and his family.

Again with the utter lack of reading comprehension, now with a heaping scoop of drama.

Originally Posted by CalPersFatCat

People have to live with their mistakes long after you earn your commission.

Ah, now we are getting somewhere. You obviously have an issue with CRE brokers. Can you show me on the doll where the bad man touched you? LOL.

Certainly, there are good and bad, just like any profession. I am no Patrick Bateman, but I can say that I've made my clients far more money per-capita than I've ever taken in. Far more.

Though, I do think it's pretty rich coming after my profession, when you worked for one of the most corrupt and loathsome entities on the planet.
CalPers has devastated countless lives, and will likely continue to do so for decades to come. Congrats!

[CalPersFatCat]

Originally Posted by Eric Coffey

Ah, now we are getting somewhere. You obviously have an issue with CRE brokers. Can you show me on the doll where the bad man touched you? LOL.

Certainly, there are good and bad, just like any profession. I am no Patrick Bateman, but I can say that I've made my clients far more money per-capita than I've ever taken in. Far more.

Though, I do think it's pretty rich coming after my profession, when you worked for one of the most corrupt and loathsome entities on the planet.
CalPers has devastated countless lives, and will likely continue to do so for decades to come. Congrats!

blah blah blah.

I have no issue with diligent CRE brokers. I only work with one. The very best in the business. ABT. Always Be Transacting. He is highly ethical and highly principled. This guy is the real deal and is one of the hardest working people I have ever met in my life, in any profession.

https://capstoneapts.com/people/stasiu-geleszinski-ccim/

In 2015, Stash guided me when I did my 1031 xchanges, out of my SoCal apartments/SFR's, and into a "value add", "double digit" cap, "rehab intensive" 40 unit apartment complex in suburban Cincinnati.

100% occupancy since October 2017.

I have bought nothing since 2015. Walked a dozen (multis), but bought nothing.

I just sit back and collect the dollars. and the quarters.

And again with the Captain Obvious statements... "I've made my clients far more money per capita than I've ever taken in" Yes. I would hope that , "per capita", a client's second year NOI , would exceed the commission split that you earned on the deal.

I didn't "work for calpers." I am simply one of the parasites collecting a nearly six figure annual retirement, after working for a couple of big california cities for 28 years...

But who in the heck has had their life devastated by calpers??? The devastation won't come until the state collapses and calpers folds, correct??? Enlighten me.

DL

[wdfifteen]

Originally Posted by plexiform

Intended use: I’d like to move in to one of the residential units and rent the rest out. .

Noooooo!! Forget all the dollars and cents, cap rate, etc. THIS is the reason you do not want to do this. You Do NOT want to live this close to your tenants.
Imagine - you have locked yourself into this financially, no way out, and you have nightmare tenants, noisy, complaining, and there is nothing you can do because you need the rent money. You can never be friends with your neighbors because you are their landlord. They would lean on your friendship for little PIA favors, or to let late rent payments slide, etc. They will “mention” every little problem because you are so convenient.
No way.