Rokslide Real Estate Investing Thread

[arrow179]

Since there is a stock trading thread I thought it would be good to start a real estate investment thread. Let’s hear about what you savvy real estate investors are doing.

I’m looking at buying a commercial property with an absolute NNN lease in place with the current tenant having 14 years remaining on a 15 year lease with rent increase every 5 years of 10%. I’m aiming for a 7% cap rate for the purchase price. The seller wants a 6.25% cap rate price. Any advice as this would be my first commercial property with this type of lease agreement?

FYI - I’ve owned and do currently own other types of real estate investments.

 

[Andrew12gauge]

I know nothing about commercial property but in a few years I’d love to buy a small Midwest farm for whitetail hunting with hopes of a farm lease to help offset the taxes


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[Duckhunterbrad]

I know nothing about commercial property but in a few years I’d love to buy a small Midwest farm for whitetail hunting with hopes of a farm lease to help offset the taxes


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A farm lease should easily offset property taxes if you don't have a large building or a home on the property.

 

[Beendare]

It's not office is it?

I've owned CRE for a few decades. I've made money and lost money. I have not done any triple net stuff. I have a couple buddies that sell these and they keep the good ones and sell the others.

Take a look at the REIT, symbol NNN's 5 year chart- they owns triple net leases for an idea of what you are getting in to. These guys are pros buying NNN leases and only buy the best deals. It's very choppy, not a good looking chart [of past performance] True they pay out most of their gains in Dividends, but you like to see it rising a little indicating improvement.



Some general comments;
1) As you probably know, Office is the worst segment- stay away. The warehouse segment is better.

2) I would think twice about getting locked into a RE deal with the best case being a 7% return when you can get that with your eyes closed in the Stock markets and be in and out in one day if needed. Example; Pfizer is currently paying a 6.4% div and it's cheap.

3) If you have to finance it, the higher rates kill your rate of return

 

[grossklw]

I haven't dabbled in NNN leases myself, do like the idea of them I just haven't found anything that really pencils out. I've owned a few different commercial buildings that have done well, but not really anything recently.

Is anyone having any serious luck getting decent deals under contract? Last year I bought nothing, the year before only a couple duplexes. I've got an off-market 8 unit I'll be buying later this year as well, but for the most part in my part of WI it's pretty slim pickings. Some of the stuff that goes under contract with the current price points floor me, they come nowhere near cash flowing.

I own around 90 units, couple STR's in there but mostly single family housing and small multi. I bought a lot in the run up before covid and have been pretty patient since then. I'm glad I have what I have now, but man it'd be tough to be just getting into it with current rates and prices. I have quite a few loans coming due in the next year that I'm not looking forward to going from low 4's to low 6's.

 

[arrow179]

It's not office is it?

I've owned CRE for a few decades. I've made money and lost money. I have not done any triple net stuff. I have a couple buddies that sell these and they keep the good ones and sell the others.

Take a look at the REIT, symbol NNN's 5 year chart- they owns triple net leases for an idea of what you are getting in to. These guys are pros buying NNN leases and only buy the best deals. It's very choppy, not a good looking chart [of past performance] True they pay out most of their gains in Dividends, but you like to see it rising a little indicating improvement.

View attachment 1074443

Some general comments;
1) As you probably know, Office is the worst segment- stay away. The warehouse segment is better.

2) I would think twice about getting locked into a RE deal with the best case being a 7% return when you can get that with your eyes closed in the Stock markets and be in and out in one day if needed. Example; Pfizer is currently paying a 6.4% div and it's cheap.

3) If you have to finance it, the higher rates kill your rate of return

This is retail not office space (ain’t doin any office spaces!). Sold a property earlier this year with a low basis so looking at doing a 1031 so I don’t get killed in taxes. This is the biggest reason for me to look at buying CRE vs investing in stock market REIT.

It’s a great location and current tenant is a franchisee for a large franchisor in this market and rapidly expanding. They do quite well from my understanding and research. The current area around it is continuing to grow and expand so that’s a major positive as well. I own another piece of real estate around the corner and everything seems to point in an upward direction especially since I’m in Florida. I figure in 10 years I will have a steady 8.5%+ rate of return and the property should appreciate nicely. I should see an IRR of at least 12-14% annually in 10 years.

Also, the property is essentially a brand new build as of last year. This seller works with the franchisor to build out properties for new franchisees then sells them.

I already have a specialty REIT investment that is paying 8% dividends and they are continuing to expand so as long as I stick with that for another 2 years I should see an additional ROI on my initial investment plus the monthly dividends.

The biggest positive is the absolute NNN lease and I really like the location. I drive by it multiple times a week and they are always super busy so I can somewhat assume they are doing well.

 

[arrow179]

I haven't dabbled in NNN leases myself, do like the idea of them I just haven't found anything that really pencils out. I've owned a few different commercial buildings that have done well, but not really anything recently.

Is anyone having any serious luck getting decent deals under contract? Last year I bought nothing, the year before only a couple duplexes. I've got an off-market 8 unit I'll be buying later this year as well, but for the most part in my part of WI it's pretty slim pickings. Some of the stuff that goes under contract with the current price points floor me, they come nowhere near cash flowing.

I own around 90 units, couple STR's in there but mostly single family housing and small multi. I bought a lot in the run up before covid and have been pretty patient since then. I'm glad I have what I have now, but man it'd be tough to be just getting into it with current rates and prices. I have quite a few loans coming due in the next year that I'm not looking forward to going from low 4's to low 6's.

I think deals are going to be completely location dependent. I’m actually also considered buying a couple single family homes as rentals as the market has really softened in the past 6 months. Lots of houses have sat on the market with price reductions. My plan is to negotiate for the absolute best deal I can as I feel like the majority of your ROI happens when you buy the property for the right price and hold it at least 5-10 years.

 

[Beendare]

This is retail not office space (ain’t doin any office spaces!). Sold a property earlier this year with a low basis so looking at doing a 1031 so I don’t get killed in taxes. This is the biggest reason for me to look at buying CRE vs investing in stock market REIT.

It’s a great location and current tenant is a franchisee for a large franchisor in this market and rapidly expanding. They do quite well from my understanding and research. The current area around it is continuing to grow and expand so that’s a major positive as well. I own another piece of real estate around the corner and everything seems to point in an upward direction especially since I’m in Florida. I figure in 10 years I will have a steady 8.5%+ rate of return and the property should appreciate nicely. I should see an IRR of at least 12-14% annually in 10 years.

Also, the property is essentially a brand new build as of last year. This seller works with the franchisor to build out properties for new franchisees then sells them.

I already have a specialty REIT investment that is paying 8% dividends and they are continuing to expand so as long as I stick with that for another 2 years I should see an additional ROI on my initial investment plus the monthly dividends.

The biggest positive is the absolute NNN lease and I really like the location. I drive by it multiple times a week and they are always super busy so I can somewhat assume they are doing well.

Sounds like you did your research.....

 

[HuntHarder]

I'd love to contribute to this thread, but I am a novice in real estate. In for knowledge.

 

[arrow179]

Well I definitely don’t consider myself an expert by any means I’ve just been buying and selling different types of real estate for the past 25 years. Some of my best buys have been rural farm ground although I grew up in a farming family and have been around it all my life. I bought my first farm a year after I graduated college before I even owned my own house. Myself and 2 buddies rented an old farmhouse for $350/mo (total not each) so I was able to save quite a bit for a down payment. Spent more $ on propane to heat it than rent per month in that old house!

 

[Beendare]

There are still deals out there but you have to know how to do them. My BIL was telling me someone bought a vacant house in his neighborhood [of $1m+ homes] for $5000 in back taxes. Now it probably needs $150k in renovations but still what a steal.

Just like everyone else he knew the house was vacant and knew something was going on but he never did the legwork.

A friend of a friend stole an apartment complex from an older couple that just wanted a certain amount and they were happy. They didn't want to deal with RE agents. He saw the place, looked up who owned it and contacted them directly and the stars aligned though it wasn't luck. He had tried that with about 40 other multi family units that he liked and these people took the offer.

No RE agent is going to get you a deal like those^ ....YOU have to do the work.

 

[arrow179]

There are still deals out there but you have to know how to do them. My BIL was telling me someone bought a vacant house in his neighborhood [of $1m+ homes] for $5000 in back taxes. Now it probably needs $150k in renovations but still what a steal.

Just like everyone else he knew the house was vacant and knew something was going on but he never did the legwork.

A friend of a friend stole an apartment complex from an older couple that just wanted a certain amount and they were happy. They didn't want to deal with RE agents. He saw the place, looked up who owned it and contacted them directly and the stars aligned though it wasn't luck. He had tried that with about 40 other multi family units that he liked and these people took the offer.

No RE agent is going to get you a deal like those^ ....YOU have to do the work.

For sure it’s being in the right place and knowing the right people and doing the legwork! I knew a guy that owned quite a few multi units in a college town. He got to know an old lady that owned one next to one of his. She wanted to sell it for like $350k. He closed on it in the morning and turned around and sold it to someone else he had lined up to buy it for $600k in the afternoon. Not a bad days work for $250k!!

 

[wind gypsy]

 

[arrow179]

View attachment 1075404

Gotta spend money to make money!

Ain’t no free lunches in real estate…

 

[wind gypsy]

When bitcoin/eth were high in 2021 I sold a fair bit and put it into a 40 acre whitetail parcel that I figured I could get some tax breaks on and would be a stable hold of value that I could enjoy.

A tractor, couple no-till drills, mower, disc harrow, sprayers, spreaders, shipping container, and many trees/posts/fencing/seed/fertilizer later it has become quite the money pit and I never found a way to legitimately use it to help with tax burden. But it's grown in value and I enjoy owning it..

 

[Hnthrdr]

I’m a RE young’en, but dad has been an agent for almost 50 years, and older brother(s) have pretty big RE portfolios… I just own 3 properties and my primary. All residential. Brothers owns a bunch of res and commercial. Honestly my biggest take away in my 10ish years of doing it is lame, but location, location, location. That seems to be the trump card like 90% of the time, and going forward with a shrinking population I would be very concerned about where I buy now for a time horizon of 15-20 years from now. Also the passive income thing is a freaking racket haha all my properties are a lot of work, I enjoy it… sometimes but never enjoy the mid elk season text that a pipe broke haha. I like being able to have an asset that can be tax advantageous, but I also like my investments that don’t call me at 3am or clog pipes hahaha

I would love to chat with anyone doing accelerated depreciation. Looking to hopefully do a few of those in the coming years and then possibly 1031 one of my properties to somewhere I deem more insulated via a better location

 

[arrow179]

When bitcoin/eth were high in 2021 I sold a fair bit and put it into a 40 acre whitetail parcel that I figured I could get some tax breaks on and would be a stable hold of value that I could enjoy.

A tractor, couple no-till drills, mower, disc harrow, sprayers, spreaders, shipping container, and many trees/posts/fencing/seed/fertilizer later it has become quite the money pit and I never found a way to legitimately use it to help with tax burden. But it's grown in value and I enjoy owning it..

When you own straight farmland all tillable it makes it easier to maintain but having a whitetail hunting property can for sure take a lot of money and effort! If you have the time and resources to do it right when you kill some nice deer it makes it all worth it. Plus you can write off the “upkeep” expense on your taxes if you do it correctly

 

[aq3]

Unless your flipping, I always tend to think of RE in two long range categories of return - financial and non-quantifiable. I think the best RE transaction are both. It's always good to use those two columns when dipping your toe into this pool. Easy to figure out the financial - initial capital investment versus income (farm leasing, building rental, etc) over time period, minus operating (taxes, upkeep,etc) What helps is when you are close to farming community, where lease income comes into play - that's where you get the both types of return because you generate the income side of things TO SATISFY the non-quantifiable return. You are making income on property, that is remaining undeveloped, while others generate habitat for hunting. As long as the lease is written in with exclusive hunting rights the property owner, and any considerations for established blinds, water ways, etc., if you have the initial capital, its really a win-win scenario.

 

[Plainsman79]

I’ve owned a couple different hunting properties over the years. I started small (12 acres) and just continued building up from there. Thinking outside the box to find a diamond in the rough can be challenging and you’d better be good with hearing the word NO. A lot. Anything through a realtor is probably going to be overpriced. There’s definitely a learning curve to developing hunting properties to be area specific and produce quality deer. It’s a TON of work, for some probably more work than is worth the reward. But it’s enjoyable for me (for the most part) and has benefits like owning your own hunting ground and when selling making a sizable profit. I might “flip” one or two more places before calling it quits.

 

[wind gypsy]

Gotta spend money to make money!

Ain’t no free lunches in real estate…View attachment 1075421

Definitely.

Also related - Thoguht it'd be real easy to rent the Mrs townhome after she moved in with me and it was for a few years. Fast forward to the past year - we're short $26k in rent from a tenant that has been bending us over and the county is not at all land lord friendly.. Lots of success stories out there but plenty of pitfalls too.