Investing 102

[Vegas69]

Thanks, Erik!

I'd be seriously looking at your local market and making a firm decision on whether it's time to "Take your money and run". If the decision is no, you should be ready to ride out the next low cycle. I know commercial leases can run through cycles, but if that business was to fold, you could be left with a vacancy.

I'm on the residential side, but I have some commercial knowledge here. What seemed to happen with the last cycle was that tenants migrated into newer, nicer spaces for a similar outlay. That left many of the older buildings with vacancies.

Going back into debt or getting back into the market is EASY. Those liabilities and opportunities are plentiful. Timing dictates the latter...

[ironworks]

Originally Posted by Vegas69

Thanks, Erik!

I'd be seriously looking at your local market and making a firm decision on whether it's time to "Take your money and run". If the decision is no, you should be ready to ride out the next low cycle. I know commercial leases can run through cycles, but if that business was to fold, you could be left with a vacancy.

I'm on the residential side, but I have some commercial knowledge here. What seemed to happen with the last cycle was that tenants migrated into newer, nicer spaces for a similar outlay. That left many of the older buildings with vacancies.

Going back into debt or getting back into the market is EASY. Those liabilities and opportunities are plentiful. Timing dictates the latter...

Todd - Do you mind sharing some of the key factors your talking about in the real estate market. I'm looking at purchasing a the building we currently occupy and have found the open lease space ratio to be getting higher but not alot for sale just yet. But I'm wondering if this is the time. I think things are gonna go on sale and I seem to keep hearing that the sky i falling and alot of smart guys are prepping for market correction. CASH is KING. Just trying to learn all I can.

[Vegas69]

I'd find a really sharp commercial agent and sit down with them for an hour to discuss the market. Not neccessarily the top salesman, but someone that is knowledgable and has data to share.

What has the median price been doing over the last 5 years in commercial sales?
What has the days on market been doing?
Is the supply increasing or decreasing?
Are any major businesses leaving town?
What are leasing rates doing?
What are businesses doing demographically? Are they moving into newer spaces or staying put?
Are new spaces being built that will increase supply?
How is the local economy performing?
What are your other options in the market place? That will help you establish value where you reside.
What's it worth to you not to have to move your facility?
What does a sharp commercial agent feel your place is worth? You could offer them a fee to analyze it and be the middle man in negotiations and close the sale.

I'm far from a commercial expert, but these are some things that came to mind. I'm sure Greg and the guys have other ideas.

I certainly don't think the sky is falling, but I do think it's time to be patient in many areas.

[ironworks]

Originally Posted by Vegas69

I'd find a really sharp commercial agent and sit down with them for an hour to discuss the market. Not neccessarily the top salesman, but someone that is knowledgable and has data to share.

What has the median price been doing over the last 5 years in commercial sales?
What has the days on market been doing?
Is the supply increasing or decreasing?
Are any major businesses leaving town?
What are leasing rates doing?
What are businesses doing demographically? Are they moving into newer spaces or staying put?
Are new spaces being built that will increase supply?
How is the local economy performing?
What are your other options in the market place? That will help you establish value where you reside.
What's it worth to you not to have to move your facility?
What does a sharp commercial agent feel your place is worth? You could offer them a fee to analyze it and be the middle man in negotiations and close the sale.

I'm far from a commercial expert, but these are some things that came to mind. I'm sure Greg and the guys have other ideas.

I certainly don't think the sky is falling, but I do think it's time to be patient in many areas.

Its probably alot of work, maybe.

But could you answer these questions with info for the area you in. Not just commercial but real estate in general in your area. I'm just trying to learn for myself and learn more stuff kinda like Greg has done with this thread.

The price of oil has really had an effect here on jobs and such but I have only seen the residential real estate market come down accordingly. Lots of places going under in the oil industry that were not saving money when it was going well.

[Vegas69]

Sure, but the data really needs to be local. Your economy is driven by oil, ours is driven by tourism. We get all the retiree's due to no State tax. etc..

The median price of a single family home is up $600 in 9 months after a 52% increase over the previous 3 years. $118,000 up to $220,600

Inventory levels have nearly doubled since the median price hit it's low point in 2012. Resale inventory has stayed steady for roughly 2 years. New home builders are building everywhere. Their median price is $100,000 higher than the resale market. I've seen standing inventory from multiple builders lately and have negotiated aggressively with them for my buyers.

Days on market has stayed pretty consistent.

Ikea just built a new store and the T-mobile arena just opened. From what I see, many are thriving here and spending money again. People are moving here again from CA and all over the country. The census data shows that we've gained population in the last few years. Not by a large margin, however. Many that were upside down have found freedom with the rising home prices and are moving away. We are growing...

Residential median lease rates have climbed $125 per month in the last 5 years.

I hired a new assistant last week. I had roughly 60 applicants in 48 hours for a $15 an hour job plus bonuses.

I'd have to research the rest of the questions.

I'm seeing a bunch of first time buyers, some relocations, and move ups and downs now with the new found equity in the market. I think the market has some good life left in it and seems fairly stable.

I'd sit down with 2-3 commercial agents and bounce some of this stuff off them if you are thinking of making a major play.

[68Cuda]

Originally Posted by Vegas69

Inventory levels have nearly doubled since the median price hit it's low point in 2012. Resale inventory has stayed steady for roughly 2 years. New home builders are building everywhere. Their median price is $100,000 higher than the resale market. I've seen standing inventory from multiple builders lately and have negotiated aggressively with them for my buyers.

Days on market has stayed pretty consistent.

Where are you located?

The market here is crazy, rental rates for residential are stupid high, and it seems resale inventory is real low and moves fast. It seems like a bad time to buy.

Everyone here is building, both residential and commercial.

[Vegas69]

Originally Posted by 68Cuda

Where are you located?

The market here is crazy, rental rates for residential are stupid high, and it seems resale inventory is real low and moves fast. It seems like a bad time to buy.

Everyone here is building, both residential and commercial.

I'm in Las Vegas. I've really grown to like the philosophy of doing the opposite of the majority.

[Vegas69]

I agree, I offer a flat fee in these situations. Some see the value, others don't.

I can tell you that I just had interaction with another attorney yesterday on residential sale. The concerns he communicated about the closing documents were elementary and showed very little expertise. The numbers were correct and the documents were valid as they were prepared. (We are an escrow state)

It's a personal preference. Your level of knowledge plays greatly into that decision. For a majority, I see value as it could save you money and surprises that an attorney just doesn't have the expertise to negotiate or communicate.

My interactions with Attorney's over the last 16 years has shown me that they understand law, not the market dynamics. That's exactly how it should be.

I rest my case..

[ironworks]

I'm just stuck in this position where I'm not sure its worth it to purchase this building if the owners who have it in a trust will even do. The benefits for me are the landlord they have managing the property is not really doing much for them. My lease rate is pretty low. So it makes it tough to swallow the payment increase but sets me up for later. So I'm working on buying what I in to avoid moving. Plus I like the area I'm in, The building works well and is very close to 3-4 of my repeat customer.

But the commercial market around here never really took a dive like the housing market did. The housing market has doubled in the past 6 years or so. The commercial has not. I'm wondering if buying another property would be more well suited with the rental rate I have. I sold a couple of my race cars in the past year and have been stashing money away to work toward owning my shop and setting myself up for the future. Just trying to understand things. I get the vibe from realtors they want to sell me something and not so much forecast what they see coming.

With the price of oil being down and unemployment being higher then normal, I'm surprised the available properties have not gone up. The rentals have. But maybe that is the sign before those unfilled rentals go up for sale. Bakersfield has always been a weird economy. When the world is falling apart things are OK. Its Agriculture and Oil that really kill us. Currently Dairy and Oil are pretty tough right now.

Just trying to learn more and more. Thanks for the info.

[Vegas69]

An example of a surprise:

The agent makes you aware of a recent code change that will stand in the way of ownership transfer and/or your financing. The seller and their council is unaware the property you wish to buy has the deficiency. You negotiate terms where the seller is responsible for any code violations. They don't realize the ramifications of the terms until they are balls deep. They are left with no choice but to bring the building up to code at their cost which could be substantial.

There is purchase price, and there is terms. Both are very important.