Commercial Real Estate Investing From A-Z

What is the state of syndications today? How to structure a syndication for protection purposes? Major differences between funds vs syndications and why are funds popular today? Jonathan Tavares, Managing Partner at Premier Law Group, shares his insights. Read the entire interview here: https://tinyurl.com/25hhhjsfWhat is the state of the market today? What are the IRRs looking like? Are you seeing more or fewer deals come across your desk?There has been a shift to funds in the last 6-8 mos. Traditionally, especially during COVID, a lot of clients were doing a lot of multifamily syndication. Now, granted, that's been a piece that we focused on for a long time. A lot of our clients are heavily involved in the multifamily space, but with increasing interest rates over 22 and various other factors, property taxes throughout many counties and throughout the country, going up very quickly, as well as insurance and specific markets. We have a lot of clients in various markets in Texas that have just gone crazy, places like Houston or Florida, where insurance rates have skyrocketed. It's presented some challenges for some of our clients. Instead of seeing just a straight deal with a certain percentage of debt somewhere around 70- 80%, a lot of times, there's a lot of creative financing going on to make up for that debt piece that may not be there or where those percentages of debt to purchase price may be a little bit lower than what a lot of clients were used to before.You see a lot of preferred equity. We've seen clients building out structures where, in essence, they're providing almost a debt structure to their investors too, to create a sort of debt piece as well as an equity piece in their raises. We've seen a lot of clients create funds and use their funds to come in for part of the debt piece for specific projects as well.Depending on the asset type, and I'll specifically exclude development projects, we're seeing a lot of target IRRs between 15 and 20% generally.Where do all the LLCs go for a syndication so that everyone is protected as much as they can possibly be?There's all sorts of different structures that you might use to set up a syndication or a fund and for different reasons, for tax reasons, for asset protection reasons, etc. A typical syndication structure is going to include a syndication entity, and that's typically known as the issuer entity, that's the entity that's selling securities.Why does the SEC care about what I'm doing if I'm raising capital to go buy real estate? The Supreme Court came up with a test that's called the Howie test. The SEC does an analysis to determine if you were selling securities or not, and essentially boils down to the four main tenets of the Howie test:1) Is an investor investing money? Typically, the answer is yes.2) Are they expecting some sort of return on profits? And usually the answer is yes.3) Whether the efforts are generated by someone other than the person who's investing, like some sort of promoter, or in the space we call a sponsor. In these deals, a sponsor where a GP that is raising the capital from investors. The investors are passive in the deal. 4) A common enterprise is if the investors are pooling together capital through the efforts of the GP to buy some sort of underlying investments. That's typically going to be real estate.Jonathan Tavares(508) 212-1193jonathan@plglp.comwww.premierlawgroup.netJoin our investor list at https://montecarlorei.com/investors/

What are the terms for an SBA construction loan? Can you refinance from a conventional loan into an SBA loan? Is there an 100% financing option with SBA? How many SBA loans can you take? Anne Mino, Senior Loan Officer at LiveOak Bank, shares her knowledge.Read the entire episode here: https://tinyurl.com/yu5ufr49Can we get an SBA loan for development?For construction, these loans are even more attractive. We offer a 26-year term, three years of interest only. The idea there is that you'll get 12 months for your construction process. We can extend it if it's a larger project, but then two more years of interest only for your lease-up period. And then, we capitalize everything the project needs until it can pay its bills. In other words, we are going to give you an interest reserve account that will make your debt payments during construction when there's no income. We'll also figure out what the operating deficit is during the lease-up period, and we can include that in the loan. It's a very all-encompassing loan. A lot of times, when we talk about what people can qualify for, they don't realize that it's as easy to qualify for a construction loan as it is for an acquisition loan. I'm not saying it's easier to do a construction project, but you can qualify just as easily. It just comes down to, "Do you have that 10%?" because we're going to give the project everything else it needs to get to stabilization.Can we refinance from a conventional into an SBA loan?Yes, the rule is that we have to be able to reduce your monthly payment by 10%. And if there's a demand language in the original note and if it's on an unreasonable term, then it's also refinanceable. Let's say you got a hard money loan, and it was a 10-year note. It did have a low rate, and I may not be able to improve your rate, but as long as the term of that loan wasn't appropriate for real estate, which SBA would say it wasn't if it was 10 years versus 20 or 25 years, then that is refinanceable.You also have a 100% financing option. Can you elaborate on that?Yes, this is the people's favorite thing to hear. Once you own a facility and you've owned it for 12 months, you can expand either via construction or acquisition with no more money down. The rules are, first of all, you have to have owned it for 12 months, at least. If you're obtaining a 504 loan, they want you to own it for 24 months. But let's just stick with the 7(a) world rate now. After 12 months, as long as the ownership is going to match identically, and it's the same LLC.Technically, if you're doing an acquisition, let's say, you're buying the facility down the street, you can roll it into its own LLC. The ownership of the two LLCs now needs to be identical, and they need to roll up to a parent company so that it essentially is one company that owns two LLCs, identical ownership, and the ownership can't have changed. If you came to me, and six months ago, you bought out your partner, I would tell you to wait 12 months because it's going to be a 12-month look back. After all, that ownership needs to be the same. It needs to be reasonable that you're sharing branding, marketing resources, third-party management, all of those things, if it's an acquisition, and then SBA says that is technically an expansion. And then, of course, if you're adding on to an existing property, that's also an expansion. Again, after 12 months, we can do that expansion construction loan with no more money into the project. That's a great way to utilize the SBA. Take your project as far as it can go, and build a portfolio with the least amount of money.Anne Minoanne.mino@liveoak.bank

Which real estate markets are growing more rapidly in the US, and why? What will happen to construction costs given the on and off tariffs? Pike Oliver, author of Transforming the Irvine Ranch shares his insights.Read the entire interview here: https://tinyurl.com/5fxk6ydmRegarding markets from your newsletter, the few growing cities are Raleigh, North Carolina, Gainesville, Georgia, and smaller, large metro areas.There are about 56 or so metropolitan areas and more than a million people in the USA, and the ones that are growing more rapidly now are the smaller ones, those that have a couple of million population. Raleigh and Gainesville would be an example of that. And even areas that are in the 500,000 to a million range, I think some of that has to do with housing affordability, and I think that also people just maybe wanting to be in a less congested environment, that has shown up to be a factor now. The larger regions, Southern California, the Bay Area on the West Coast, Seattle, New York, all the Boston to Washington corridor on the east coast, and Atlanta, they're growing at slower rates, and a large portion of those regions do present a housing affordability challenge. If you look at the percentage of household budgets that go to housing and transportation, it's a significant percentage. Can you manage your transportation cost? Maybe that'll be somewhat dependent on distance to work and commuting, but the big cost is having the vehicle, insuring the vehicle, and financing that. The one that you can manage is to go to a market that has much less expensive housing. If you're in a market that can offer you a $400,000 house, versus a market where it takes a million, that makes a big difference.I wonder how the inflation will continue to make an impact on the bedroom communities?That's a big question. The whole issue with potential tariffs. Now, I believe we're on again with some pretty significant tariffs on aluminum and steel, affecting Canada, Mexico and and certainly China. I think that's as I understand it, across the board, that'll have some impact. I think just the uncertainty will have some impact.And then construction costs, my take on that is I don't see much abatement in that area. We're going to have, I think, continuing in Southern California, because of the fire effect, they'll be as significant and particularly on the labor side. And this also then relates to the issue of immigration enforcement in the construction industry, particularly the residential construction industry, there's a substantial percentage of undocumented people working in those areas. Again, an open question as to how much of that is going to translate into higher labor costs.Looking ahead in 2025, people were saying, hold until 2025 and you'll be fine. And now, they move to 2026, I hear lenders are extending their loans to their existing clients based past 2025, where do you think we're going to be this year? Do you think it's a great or not so great time to invest in real estate?It's always a good time if the characteristics of the individual property are great and if you can swing the equity or the debt to close the deal. As to whether there are a lot of real bargains, that doesn't seem to be the case, the only area where that seems to be a possibility is with office assets, but then you're taking on the challenge of occupying that space, or undertaking a residential conversion.Pike Olivernews.ares.orgpike@urbannexus.com

How to negotiate better loan terms and manage lender relationships? We will also cover top lessons learned at the latest conference and evens, and what is the current state of the market?Read this interview here: https://tinyurl.com/yf53zdpuLessons LearnedSome of the Dollar Stores that closed are now selling in bankruptcy for a huge discount.There are so many ways you can partner up with people, you can do a JV (joint venture) with owners who have a lot of dark real estate (such as Dollar stores that are closing). Dark retail is a retail store that still has a lease but they have decided to close doors, they are still responsible for rent, but having a dark retail in your center isn’t good for your other tenants, so you would want to have that property filled again. What can you convert that to?You can partner up with cities, ask the city what do they need, offer to buy the land at $1/sf, offer to pay starting on year 3-10 when the property is ready or fully stabilized, get funds from them or breaks in fees.If you need a capital partner, there are capital market intermediaries that can help you find family offices or a construction loan, I spoke with a couple of people that did that a while ago and as far as I recall, their fees are around 2-2.5%.When you raise a fund, the real estate fund management fee is 1.5-2% of the committed capital.Don’t give special terms such as MFN unless an investor is committing a minimum of 25% of the deal. A “Most Favored Nation” clause gives a party the legal right to terms and benefits under the contract that are as good as or more favorable than the terms and benefits received by anyone else who enters into a similar contract with the other party.After webinar let them know you have the next week open for any questions they may have, this builds trust and helps them move forward.Loans and Lenders:You must pick up 5-6 new lenders a year.Meet all of your lenders yearly, give them a report with your PFS (personal financial statement), show all property owned, how they have performed, share your mistakes and lessons learned, share the vision for the company, be proactive, present the business plan, how have you operated the assets.After a loan is done, the lenders get a 2 week update, then it becomes quarterly. Send pictures, and show how are you doing vs pro forma.Negotiate on loan unforeseen costs, stick with your needs even if you may lose that lender.Negotiate that if you hit x percentage value increase, the lender gives the loan at x interest rate.Agency debt is non recourse, and credit unions are great.Don’t give any personal guarantees, the bigger you go, the less common it is for them to ask for a personal guarantee, lots of co-GP family offices can help and will show their balance sheet. You will need to have some guarantor for carve outs only.We must negotiate debt to the ground, LTC is currently at 50%, don’t do variable rate.We must read all pages of the loan docs and comment, edit, someone I know has made as many as 500 comments. You must have other banks lined up first they say no. Also, put a homestead exemption on all of your loan documents so they can’t take your home in case things go south, and make sure that they’re not removing any of your constitutional rights.What topics should I cover next? Let me know at admin@montecarlorei.com

How to repurpose real estate? How to negotiate a contract in an expensive area? How to work with the city to get your project entitled? These were notes from a development event we attended.Read the entire interview here: https://tinyurl.com/9624cn5kSmart developers are in touch with their city representatives. The city is a great resource for leads. If you meet with them, they will tell you: that’s a bad land owner, or we want this place developed. Entitlement goes super fast when the city owns the land. Create a public/private partnership with the city so they sell their land for cheap and you build what they need in the area, and they allow the change of use to what is needed. You would put a development agreement in place, and the city offsets fees to help the deal work. Ask city what projects are stuck, which projects developers are not paying them for or have loans coming up. If working with land that the city owns isn't an option, and for areas that you may think there is no more land to build, note that everything is still available to build, in the sense of you can repurpose several buildings. The things the presenter looks to get in contract and build (in their case multi family) are: auto dealerships, used car lots, private schools, a shopping center that isn’t doing well. When working on a deal in a city that is known to be difficult, for example, any city in California, make sure to keep the deposit on your offer very low. They recommend $50-100k, and make sure that you can get your deposit back if there is a 50-50 chance of the project working out. Try to figure out early with the city if it is likely to work out or not. If the seller doesn't like your offer with a $50k deposit and 2 yr due diligence, show them your track record, in the sense that you will close once you get through the city, and show the fact that you have always closed on all of your deals. A contract that has worked for the presenter is having 75-90 days feasibility, and at the end of that, have a non refundable deposit, in this example $50k, and have a close of escrow based on getting the permit, or a 18-24 month timeframe, with options to extend. You should also note that you will close earlier if you get the grading permit, or within 18 months and 3 extension options. You may think this is unrealistic in expensive areas in California, but they normally get this accepted because they close on 100% of deals that they get permits for. As far as getting any property entitled, make sure to have individual meetings with each city council member before getting it entitled, so you can manage the story very well. Find what’s important to the neighbor as well. People are investing in what they call "bedroom communities" which are the cities near larger cities that are growing, also known as path of progress. An example would be Atlanta and Marietta which is a near by town that people started moving to after prices in Atlanta got too expensive, but they still work in Atlanta. Lastly, a few months ago we interviewed someone that was building homes with a retail component in the bottom in Utah, so that the owner would have their business at the bottom and live on top, and that person said that those were very popular. However, at this event, they said the opposite, shopkeep space for the bottom part of a house is not the best way to address that, the best is to have a condominium lease floor and have a retail broker lease them out. We are highlighting both perspectives so that you do your own homework, if this is something you'd like to build in the future.

What type of industrial building is Chad Griffiths investing in today? What are the downsides of the industrial asset class? Chad Griffiths, Partner and Commercial Real Estate Agent at NAI Commercial Real Estate shares his knowledge.Read this entire interview here: https://tinyurl.com/mre9kmt4What are you investing in right now?I like very simple buildings that can be used for multiple purposes, and my favorite is Flex Industrial. It is any industrial building in an industrial park used for other purposes than manufacturing or warehousing. One building that I have on a main industrial road used to look industrial until we did a renovation on it. We have an office tenant in there, a hot tub store, a flower shop, a cabinet store and we just put a bridal dress company in there, all are nonindustrial uses. Most people would never think of a bridal shop being an industrial building, but this building works for so many different types of uses, that if we have a vacancy come up, we might have 20 to 30 different ideas that people present to us in terms of what could work in the building.I love that in flex industrial the rates tend to be a lot more competitive than retail. If someone wants to be in the suburbs as an office user, you're typically going to be paying a lot less than being in a dedicated office building in the suburbs, and you could still have light industrial in there as well. It's versatile and it's somewhat removed from warehousing. The one that I have is more in the inner city limits. It's very difficult to build something next door to us to compete with us, whereas, if you have a warehouse outside of city limits and there's available land, you could go and build another building next door, and have the versatility of the different types of tenants, that's my preference. If I could buy one thing going forward, that's what I'd focus on.There are a lot of people who are opposed to data centers. Anytime a new one gets presented, it seems that there's an opposition group that are trying to fight it and get it blocked. I understand that pushback, but we need these data centers. AI is growing at a crazy pace. We need the data centers on top of it. There's a study that said that by 2030 data centers will take up 9% of the total US grid, that's double from what it is today, and that's already coming off of huge growth in the last few years, as these data centers have become more prevalent. They're taking up a lot of power, the forecast is for them to take up even more power, and they also need water, which is, I think, an under appreciated component of data centers. What are the downsides of the industrial?I've said to a lot of people, don't invest in industrial real estate. The biggest thing is, if you make a mistake, it's magnified much more than any other asset class. To illustrate, imagine if you were to buy a 15-unit apartment building, and you bought it in a good area, in a city, you're always going to have tenants in there. You just might need to lower the rent a little bit. If it's $1,200 and you say, "I just want to have I want to make sure my bills are paid." and you undercut the market at $800, you'll always have tenants. It's a matter of what price you need to accept. In industrial, if you buy the wrong building, you might never find a tenant. There are horror stories that I could tell of guys that have bought a property and they've sat vacant for years. If you do that with a single-tenant building, perhaps for the equivalent price of a multi-tenant apartment building, and it sits vacant, you lose 100% of your revenue. Chad Griffithswww.industrialize.comwww.youtube.com/@industrialize

Why should you have a mid-term rental? What are the pros and cons of mid-term rentals? What do corporations look for when looking for corporate housing? Angela Healy, CEO of AvenueWest Managed Corporate Housing shares her knowledge.Read this episode here: https://tinyurl.com/4uaeke3pWhat are midterm rentals? Why should someone have to offer a midterm rental as an investor?Most people are very familiar with long-term unfurnished rentals, and in the last decade, short-term rentals have been very popular with Airbnb. Those midterm rentals have slid under the radar for quite some time, but we're making more headlines now because so many cities are prohibiting short-term rentals. In New York and Denver, we have a lot of regulations around short-term rentals, whether you need a license, whether you're restricted in which kind of properties you can offer, whether it has to be your primary residence, or whether you can only do it for 90 days. A lot of regulations happening around short-term rentals so what people are finding is, instead of either selling the property, especially in this real estate market, or switching it back to an unfurnished, long-term rental. They have another opportunity to be able to keep the rental furniture there and still be able to make a higher yield than they would be renting it unfurnished.The nice thing about midterm rentals is if you work with a corporation like ours, you could rent them to corporations in the area, so you have a really solid customer base. No one's going to do anything to their corporate apartment that will make them get disciplined at work, and the average stay is about 99- 100 Days. You do have a couple of turns a year but nowhere like what you were doing with Airbnb in terms of maybe a couple of nights and then a turn. It is a nice medium compared to the unfurnished rental.We have a couple of offices in California where the rules and laws around renting properties are very much geared toward the tenant or The occupant. By having the corporation rent the property for a specific assignment, you're not going to have somebody end up squatting or staying there beyond their term of what they're allowed, which also allows you to keep the rental rate up with the market. Once someone moves out, you're not subject to rent control, you can set your new market. If the industry or the real estate market is on an upswing, you can certainly get the increased prices related to the upswing and it is a nice way to diversify your overall portfolio. What are some cons to midterm rentals?We are subject to corporations and their ebbs and flows. That doesn't necessarily mean that it's only good in an up environment, because when there's a down environment, we do see movement of employees when they consolidate locations. Maybe they're closing this office and they're going to relocate everyone to this office. If your property is located near the office that closed, that could certainly be a con.And then, there are times where we can be affected by the overall economy, like, if the government shuts down for a week, and everyone takes a deep breath and they're like, "Oh, what's going on? How long will they be closed?" We could see pockets of times when everyone is kind of taking a breath and trying to adjust to the new economy but once they do start making those plans, like either closing places, maybe they're going to expand, or maybe interest rates are rising, and everyone's kind of taking a breath, businesses will start to adapt to that and start to make some sort of change, and that change is good for corporate housing.Corporations do not relocate people, and they do not start new assignments in December but that doesn't mean that we go vacant in that month, but if your tenant happens to leave in December, the likelihood of us finding somebody new before

How to form a successful partnership as real estate operators, what are some of the important tools and processes to make your company run smoothly? Amy Johnson, managing partner of Y Street Capital, shares her knowledge.Read the interview here: https://tinyurl.com/bddxjmvvHow did you partnership come about?My husband and I decided to get into the rental game market of residential houses and we turned our own little primary house into a rental and moved into an ugly, disgusting house and kept doing that over and over. It was difficult for us to scale, to keep doing individual residential house: get the loan, qualify, find the right property, all of those things and we knew we wanted to continue to grow. Fast forward, we acquired a great amount of properties, and decided to sell some of our portfolio and roll those into some larger assets. And one of those assets, we were an LP or a limited partner in some self-storage and saw the power of that.Then we got into land development, I needed some additional support, and that's where I met Victor Menasce, through a different mastermind. I paid him as a consultant on a project. As we were bringing on different projects, I had brought on some others and we just had a really good working relationship with different things, and they had some skills and knowledge and different things that I needed. I realized, that if I wanted to scale this, I couldn't do everything on my own.How did the conversation start so people can understand where values come from? Why would you both want to do that?Both companies were very successful before and I think that it is like a relationship, because partnerships are a good relationship. Instead of coming for a spouse or boyfriend having a cup that's half full, and expecting your partner to fill the other half, both of you come with a very full cup and come together, and then you get to create something even bigger. It wasn't that one person came in and tried to save or rescue or take over, that is not a great partnership. Now, that can be a business move. I have looked at other companies where I could see where I could add value. It doesn't mean you can't add value to them, but you're going to come together full and create something bigger, so that each has one cup and, together instead of making two cups, you make three.What tools have you implemented? What has been the most helpful to your company and how do you manage and oversee everything?One of the systems that we utilize is our EOS system, our rocks and our wigs. It is aligned and doing our level 10. If you have a good EOS system, it's because you have your priorities straight. When you have a company that is only handling emergencies or firefighting, you're not putting your priorities in straight and that's where you're not growing as well. Another system for us is Asana, but that's more for our project management standpoint. I used to use Google Doc to make my to-do list, and I'd share it with my assistant. Good tracker, but there's more accountability with Asana. Some individuals say, "The last thing I want to do is taking four meetings a year of two days each, plus every single Friday for two hours to go over our rocks and wigs and our issues lists, and things like that. If you're busy, sometimes that can seem overwhelming and I was grateful for the structure. There were times that I was like, "I'm so busy I don't have time for this." You need to make time so that you can create it.Amy Johnsonamyj@ystreetcapital.comhttps://www.linkedin.com/in/amy-johnson-358217162/