These notes and highlights are from the book;
How To Win In Commercial Real Estate Investing – By R. Craig Coppola
1) A prestigious building with excellent upkeep and landscaping says to the world that this company is a player, that it is reputable and can handle my business. A shoddy-looking building tells the world that a company might be fly-by-night, not very progressive, or just plain cheap. If “the clothes make the man,” as the saying goes, the building exterior makes the business.Read more at location 2677
1) It is critical to find a leasing broker/advisor who sees his or her job as one of relationship building, not just completing transactions. I have spent the last twenty years doing deals, and in the process, have built excellent relationships with the real estate professionals where I live and work.Read more at location 2730
1) As a rule, I put a great deal of time and energy into providing lots of information to prospects and clients. Even if there is no agreement for representation, I generally am eager to help because I know that’s how to build a relationship.Read more at location 2737
1) The best leasing agents/advisors are the ones most knowledgeable—not about the whole city or town—but about one square mile. Find this person and you’ll be in good shape. It’s not hard; just drive around and look at whose name appears on the leasing signs most frequently.Read more at location 2755
Zeller said there are two types of pain: the pain of discipline and the pain of regret.Read more at location 238
Demographic Data: One of the best tools is a simple one. It’s a file—on your computer, in a drawer or in a binder—that contains all the demographics of your city, town, and state. You’ll want to know this material inside and out. Demographic data comes in many forms, and at times it will be your best friend because it will reveal to you trends and projections for various areas of your city or town.Read more at location 301
before you get excited about the building, it’s more important to understand where a neighborhood is going. Is it trending up, staying flat, or declining? It’s all about looking forward, not backward, because when you’re buying real estate, you’re buying futures.Read more at location 323
the tenants within a building are extremely important. Knowing everything you can about their businesses—their profitability, their credit rating, their financials, their clientele, their site requirements, etc.—can help you make good judgments about a building you’re considering.Read more at location 343
How did I know that a neighborhood with a $50,000 household income average was acceptable and anything below that wasn’t? Because a quick search of Sizzler Steakhouse franchising reveals its site selection criteria. The company’s many location requirements included a neighborhood with household income no lower than $50,000. It’s that easy.Read more at location 347
Another software application that I use is ARGUS (argussoftware. com), which is an investment analysis program.Read more at location 358
How powerful is it when you go to potential investors on your first deal and say, “I have saved $5,000 over the past two years, putting away only $200/month, just so I could put ALL of it in this deal?” That’s commitment. That’s passion.Read more at location 385
you want to be taken seriously in this business and be successful, doing your homework is more than a must. It’s a critical prerequisite for establishing a solid reputation. Reputation leads to contacts, and like in every business, in real estate investing, contacts are golden.Read more at location 408
It showed me the right way to work with an investor. He was grateful for my decision and it only increased his confidence in me. He is now one of my repeat investors. Why? Because he saw that I would always do the right thing even if it cost me money, and for that reason he trusts me.Read more at location 422
Margin became my mantra after that because unexpected things happen and it takes deals with a margin to survive.Read more at location 426
Launched Lee & Associates Arizona, the firm I still work with to this day.Read more at location 442
Put into non-metaphorical terms, Parker also quotes Earl Nightingale and states that if you spend one extra hour a day on your chosen profession, within five years you will be an expert. I believe it. The difference between good and great is inches, not miles.Read more at location 463
But I had the belief. I knew I could finish, and I did. Real Estate investing is like running marathons. You’ll have those voices in your head, too, as you embark up on the trek to becoming a real estate investor. Luckily, dehydration won’t be a problem, but along the way, belief probably will be. Expect it and move beyond it, just as I did in the race.Read more at location 492
In case you haven’t caught on by now, the first two weeks are a process of narrowing or pinpointing the opportunities. Nothing is more critical at this stage, and nothing takes more discipline.Read more at location 568
start becoming an expert in your real estate type and the locations you have chosen.Read more at location 576
of General Electric and best-selling business author, has an axiom: “Face reality as it is, not as it was or as you wish it to be.” He’sRead more at location 678
In fact, I was not the managing member of the first several deals I invested in. I invested money in other people’s projects just to learn the game. There was a lot to know, and it was a good first step.Read more at location 863
How do you recognize the path of growth when it comes to commercial real estate? Look for where home builders are buying land, where new homes are being constructed, and where elementary schools are planned and being built. The city government is a great resource for this information. Their staffs and records can tell you where they are planning to build new facilities and where infrastructure is going in.Read more at location 890
For example, you’ll find that growth in residential housing will fuel a similar but slightly lagging rise in retail. It makes sense when you consider that new homeowners will want shopping centers, grocery stores, and other conveniences near where they live. The surge in retail then drives growth in industrial and distribution, so that means warehouse and mixed-use property development grows. Home development also drives some growth in commercial office space, but again commercial lags behind. That’s why when housing development slows, it takes a few years for commercial to slow down, too.Read more at location 1025
Within each of the commercial property options we discussed earlier in this chapter are four classes that refer to the quality of the property. The class guidelines are as follows:Read more at location 1076
Once you start seeing the patterns, you’ll learn to buy for tomorrow, not today. This is one of the most important concepts in this book.Read more at location 1165
Expenses: This is a further explanation of lease type and confirms what expenses are paid by the tenant and what ones are paid by the owner.Read more at location 1251
Debt Service: This number shows how you will pay down any debt. You might secure your own financing and have your own debt service schedule, but if that isn’t the case, you’ll need this number to calculate cash flow. If there is no existing debt on the building, again, this number will come from the lender.Read more at location 1280
That’s not my thing; either the location is on the up, or I am out.Read more at location 1323
How To Win In Commercial Real Estate Investing – By R. Craig Coppola
What does “buy it right” mean? It means many things, but first and foremost, the property must have positive cash flow and I must be able to get it below replacement cost.Read more at location 1348
Traffic reports, crime rate reports, business growth, business failures and demographics, home values and raw land values are very important.Read more at location 1414
Each property will bring different types of loans. I might have to go to fifteen lenders to finally get the loan I need based on what I want the property to achieve.Read more at location 1654
1 I’ve had to make cash calls to my investors. They are not fun for me to make and they are not fun for my investors to get. Your investor has to write you a check on the spot and may have to do so every month until operating revenue once again covers the loan amount.Read more at location 1699
The truth is, a good real estate deal requires little selling.Read more at location 1739
Before I chose a deal to get in on, I met with several people who were looking for money to learn how they structure deals. I did this to compare; I wanted to see how many different paths there were. To be honest, in some cases I had no real interest in the investment itself, my meetings were learning ventures.Read more at location 1744
If I have a single tenant building, I like to have a year’s safety net set aside in the event the tenant vacates. That means I can pay the loan and interest for an entire year from reserves if I have to until we find a new tenant.Read more at location 1768
You may feel more secure with one big, highly accredited tenant, but you’re actually more secure when you have many tenants.Read more at location 1772
An attorney once told me if Uncle Bill wants to put $50,000 into your deal, walk away. But if Uncle Bill wants to put $500,000 into the deal, it may be worth taking on an unaccredited investor.Read more at location 1822
The reason you are looking for accredited investors is because the amount of legal filing and paperwork required to work with people who are unaccredited is cost prohibitive in most deals, particularly smaller ones. The red tape is exorbitant and the value minimal. As a rule, I only take on partners who are considered accredited.Read more at location 1825
Share Your Offering With Those You Trust: In most cases, you cannot directly advertise your offering. There are new rules for public “crowdfunding” efforts. More information is found in the book, Finance You Own Business.Read more at location 1828
In 2006 before the crisis, we bought twenty-six acres of land and paid $5 million in cash. A year later, we took a $1.7 million loan out to improve the property and divide it into finished lots. After that, the property had appreciated to an appraised value of $8 million. When the loan came due in 2008, the lender required us to pay down the loan $500,000, bringing the loan to $1.2 million on a property worth $8 million. That translates into a 15-percent loan-to-value,Read more at location 1844
The more people you meet, talk with, and build relationships with, the more people you will find who fit this description. As I said before, when the deal is right and the numbers work out favorably with enough cushion, you’ll find the money you need. I’m confident of that.Read more at location 1853
There are three methods that I use to value a building after I’ve narrowed down the choices:Read more at location 1894
I look at the similar buildings, similar price range, similar size, with similar location to see how much they have sold for.Read more at location 1896
The second way to evaluate a property is to estimate how much it would cost to replace the building.Read more at location 1906
Knowing the land value helps me establish a true value for the structure on that land. That’s how I determine whether or not I am overpaying for a property. The other real benefit of this is, I can determine which properties I can buy at or below replacement costs.Read more at location 1911
To determine the replacement costs of the building, simply talk with your new-found contractors. People in the construction industry, including builders, architects, and other trades people, can give you an idea of what it would cost to build the same building today.Read more at location 1914
If we’re going to look at the property you’re considering as an investment, that will mean we will want to get out of that investment four important benefits: • Appreciation: I want the property to grow in value. • Cash flow: I want to derive a monthly dividend from my investment based on the property’s operations. • Leverage: I want to use other people’s money to achieve appreciation and cash flow, not all my own. • Depreciation: I want favorable tax treatment to minimize my annual taxes.Read more at location 1928
I want a real estate deal to work without taking appreciation or depreciation into account. The deal has to make sense without thinking about these things, which I consider icing on the cake.Read more at location 1938
In their financial analysis seminar, they review the concept of t-bars. A t-bar is the tool I use to help me map out the projected cash flow of a property and then compare it to the projected cash flow of other properties I may be considering. People call this a “napkin pro forma.” It keeps things really simple and you get a picture of exactly what you are getting into with an investment.Read more at location 1944
created this t-bar using the values from a property’s OM. Later, once the property has passed this initial test, and assuming it passes my other criteria, I’ll do the work of validating the numbers. Why do the work of validating if the property doesn’t make sense from the numbers on the OM?Read more at location 2065
By developing t-bars for alternative investments, you are building the library of deals that you may want to chase.Read more at location 2074
This calculation tells me how much money I am going to get on an annual basis, divided by how much money I put in. Recall this formula is simply: Annual Income ÷ Annual Dollar Investment = Cash on CashRead more at location 2082
the numbers don’t look good on a napkin and a simple T-square, move on. For me, it’s all about how much money am I putting down, how much am I going to get back, and how much I get to keep.Read more at location 2102
Recognize that pursuing this deal further will mean costs to you, so you want to be as sure as you can be at this point. The good news is that you’ve done this analysis on multiple properties, so you know which one looks the best compared to the others.Read more at location 2109
Speaking from experience, I like to know that someone can’t come in and replicate what I’m buying at or near my cost. So for me, I either buy the building that is “special,” meaning the location is irreplaceable, or buy the commodity building that is below replacement cost. I like to buy buildings that are 30 percent below replacement, so that my operating costs can be lower than the other guys’. That gives me the unfair advantage. I’m always ethically looking for the unfair advantage.Read more at location 2118
Or maybe the property owner loses a tenant, and the cash flow becomes even less than before. The debt is still out there and, if the property value declines significantly, not only may the owner be upside down on the loan—meaning owing more than the property is worth at the time—the owner may also be feeding that loan with less operating income than before. It can get ugly pretty quickly if you don’t do your homework and base your deal decisions on cash flow, cash flow, cash flow.Read more at location 2125
In essence, you’re painting a picture of the property and why the lender should invest in it.Read more at location 2351
You have every right to meet with the tenants to discuss their economic outlook and then verify through annual corporation reports, tax filings, etc.Read more at location 2375
Understanding tenant satisfaction is not only a good way to determine the likelihood of renewal, it is where I learn everything about the building. This happens through personal interviews with tenants. Smart owners want to sit in on the meetings with you, because they know tenants will talk. Regardless, the questions I ask include the following: Tell me aboutRead more at location 2377
Lack of “other” income in an existing building may signal some terrific money-making opportunities.Read more at location 2398
1 They want to make sure you are working your plan and that your plan is effectiveRead more at location 2517
They are typically long-term leases and sometimes are what are known as “sale lease back” deals in which a tenant owner sells his or her own building to an investor, then leases it back for a long-term agreement.Read more at location 2568
Within a year, the quality business tenants in the lower floors had moved out and on the top floor near the medical practice a hair club for men moved in. It was all downhill from there. In less than a year, a solid Class A property with a quality tenant mix became an undesirable property to all but a few fringe businesses. Quite a shame. Professional leasing agents/advisors know what can happen if you lease to the wrong kinds of tenants.Read more at location 2609
The best leasing people know how to create a match between client and space, and then have the ability to sell the vision, even if it is not completely obvious.Read more at location 2616
Aspects to be considered are the number of months and what is included. Is it just the rent, or does it cover common area maintenance fees, parking fees, etc.?Read more at location 2667
