Commercial Real Estate knowledge and/or experience? Help!!

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Topic Author
ElmoHongZito
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Commercial Real Estate knowledge and/or experience? Help!!

Post by ElmoHongZito » Thu Jul 25, 2019 4:36 pm

I am in my mid 30's and looking with a business partner for a property where we can open up an events center that will host large memorable events. It will have 4-6 divided ballrooms which can be undivided for one larger event (800-1200 people). We are thinking that a 40k sqft building on about 3 acres should be enough to make this happen and have sufficient parking. The challenge has been finding the property.

Can anyone with experience in this share any suggestions or guidance that may help get us find something quicker and also comment on financing of a project like this. If we have a million for down payment, how much will a bank be willing to lend for this type of project??

Buying land and building the space from scratch would be ideal but also very expensive and take a while. Plus I am not sure how much the bank will help with financing if there is not a structure on the land. 3 acres of zoned land in our county in a reasonable area will easily be 4 to 7 million. The land prep and buildout maybe another 3...? (not sure).

Any and all feedback from anyone that has some experience in this area would be very helpful and I will very much enjoy reading your input.

mw1739
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Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by mw1739 » Thu Jul 25, 2019 5:09 pm

A bank would typically lend 75-80% of the value, meaning your $1 million down payment would limit you to a total cost of $4-5 million.

runner540
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Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by runner540 » Thu Jul 25, 2019 5:17 pm

Do you or partner have event planning/hospitality experience? This is really a business, not just property.

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Sandtrap
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Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by Sandtrap » Thu Jul 25, 2019 5:22 pm

Do you have a business plan?
How much do you each have to invest?
Are you both now in the event business and have current clientele and cash flow and are not renting spaces as you need them?
If you built up this property for events, and the economy fell in several years, how will you handle debt repayment? Will you be able to sell the property and recover you investment?
j
Wiki Bogleheads Wiki: Everything You Need to Know

megabad
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Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by megabad » Thu Jul 25, 2019 5:54 pm

ElmoHongZito wrote:
Thu Jul 25, 2019 4:36 pm
Can anyone with experience in this share any suggestions or guidance that may help get us find something quicker and also comment on financing of a project like this. If we have a million for down payment, how much will a bank be willing to lend for this type of project??
Sure, I would put up my other properties as collateral and then I would easily get 70-75% financed. So this is about $4 million total ($3 million financed) assuming you have enough other equity in other properties. Of course this necessitates one bank holding all your property in most cases. Alternatively, I would have to show a massive income on my W2, but I usually take a ton in RE losses on my taxes so I can't do that. Banks in my area pretty much won't do small business loans of any size without personal backing.

Topic Author
ElmoHongZito
Posts: 218
Joined: Tue Mar 27, 2018 9:17 am

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by ElmoHongZito » Thu Jul 25, 2019 7:40 pm

Sandtrap wrote:
Thu Jul 25, 2019 5:22 pm
Do you have a business plan?
How much do you each have to invest?
Are you both now in the event business and have current clientele and cash flow and are not renting spaces as you need them?
If you built up this property for events, and the economy fell in several years, how will you handle debt repayment? Will you be able to sell the property and recover you investment?
j
We are in the "memorable events" space but not hosting the actual celebrations/venues. We do the photography, video, make-up, dresses and tuxedos and have a venue out in the suburbs for photo shoots. An event space would be a good complement to our business where we can go full circle and capture more of our clients spending budget in-house instead of only a portion of it.

As far as how much do we have to invest, neither of us are planning on comming out of pocket with more than 500k each, thus the million I mentioned in the original post. We will not get into the project if we cannot cover overhead with very minimal bookings. Goal would be to have 4-6 events every Friday and every Saturday, but would like to be able to cover monthly overhead with just 1-2 events per week. Might be wishful thinking but just wanted to answer your question that we are taking into consideration a possible market crash while being in a commodity business and at worst case scenario having a property that we could sell and recover our investment. With the amount of parking we plan to have and how difficult I have found it to be to find commercial space with ample parking, I think we have at least somewhat of an advantage if we ever go to sell.

Business plan and strategic implementation/marketing plan has not been completed because we have been investing most of our time in finding an actual space first and it has been a challenge. 40k sqft spaces in commercial shopping centers are not easy to find and when we do, they want 70-100k in rent per month. Land is outrageously expensive. Found a spot today that I like allot and if they agree to our use, they want 1.7 million per acre. This is why I am also asking about financing because with these ridiculous RE prices I am afraid that we need allot more cash than what we expected in order to take on this project. Thoughts?

Ping Pong
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Joined: Fri Feb 20, 2009 12:51 pm

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by Ping Pong » Thu Jul 25, 2019 7:43 pm

Customers typically want a hotel attached to these types of event spaces.

Topic Author
ElmoHongZito
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Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by ElmoHongZito » Thu Jul 25, 2019 7:46 pm

megabad wrote:
Thu Jul 25, 2019 5:54 pm
ElmoHongZito wrote:
Thu Jul 25, 2019 4:36 pm
Can anyone with experience in this share any suggestions or guidance that may help get us find something quicker and also comment on financing of a project like this. If we have a million for down payment, how much will a bank be willing to lend for this type of project??
Sure, I would put up my other properties as collateral and then I would easily get 70-75% financed. So this is about $4 million total ($3 million financed) assuming you have enough other equity in other properties. Of course this necessitates one bank holding all your property in most cases. Alternatively, I would have to show a massive income on my W2, but I usually take a ton in RE losses on my taxes so I can't do that. Banks in my area pretty much won't do small business loans of any size without personal backing.
So if the land plus buildout comes out to lets say 8 million, we would have to come to the table with 2 million (in the form of cash plus RE equity) to get financing for the project?

Topic Author
ElmoHongZito
Posts: 218
Joined: Tue Mar 27, 2018 9:17 am

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by ElmoHongZito » Thu Jul 25, 2019 7:49 pm

Ping Pong wrote:
Thu Jul 25, 2019 7:43 pm
Customers typically want a hotel attached to these types of event spaces.
There is enough business for hotels and stand alone event venue businesses. Hotels also start at extremely high rates that not everyone has the budget for. The goal is to be strategically priced below hotels and higher than banquet halls.

momvesting
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Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by momvesting » Thu Jul 25, 2019 7:58 pm

You probably just have to wait until the right space comes along. I think the best possibility is an older property with some sort of cool architecture or history and you can maintain some small portion of the charm of the building's original use. I'm thinking something like an old library with a few stacks strategically placed to separate areas. This could also help with marketing and desirability, as many people want cool event spaces, not just a big box of a building with dividers. Hopefully an older building with a specific former use might be easier to get a good price on as well.

Wricha
Posts: 514
Joined: Sun Mar 25, 2012 10:33 am

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by Wricha » Thu Jul 25, 2019 8:28 pm

ElmoHongZito wrote:
Thu Jul 25, 2019 7:46 pm
megabad wrote:
Thu Jul 25, 2019 5:54 pm
ElmoHongZito wrote:
Thu Jul 25, 2019 4:36 pm
Can anyone with experience in this share any suggestions or guidance that may help get us find something quicker and also comment on financing of a project like this. If we have a million for down payment, how much will a bank be willing to lend for this type of project??
Sure, I would put up my other properties as collateral and then I would easily get 70-75% financed. So this is about $4 million total ($3 million financed) assuming you have enough other equity in other properties. Of course this necessitates one bank holding all your property in most cases. Alternatively, I would have to show a massive income on my W2, but I usually take a ton in RE losses on my taxes so I can't do that. Banks in my area pretty much won't do small business loans of any size without personal backing.
So if the land plus buildout comes out to lets say 8 million, we would have to come to the table with 2 million (in the form of cash plus RE equity) to get financing for the project?
I would yes and that is the absolute minimum. The bank will want to see/understand your business plan and evaluate your business experience/successes to date. To you $2 million is a lot of money, to the bank they are thinking I don’t want to be stuck with a building even with a 25% discount.. They are bank not a real estate company. The bank is going to rely on your business experience and business plan to completely evaluate the project after all they are investing in a business not just a building. The business is going to determine whether you can afford the building not the down payment.

dawoof
Posts: 18
Joined: Tue Jun 18, 2019 8:34 pm

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by dawoof » Thu Jul 25, 2019 8:38 pm

Hi there,

Not knowing anything about the business, this sounds like a large development investment. Have you had any experience in developing a real estate project? I would definitely do a cashflow analysis as well as a real estate proforma to determine if the investment will generate enough income to be profitable. Construction cost is also very high right now across the industry.

I am in residential REI and have studied commercial real estate development but have not ventured into the arena. When you get into RE Development, the bank will want to see your construction plans plus contractors’ bid and they will do a market comparable to determine if your development will have the value and income to justify the loan. And that’s just the beginning.

From what I have learned in a typical leasable project, your first loan will be a construction recourse loan with variable rate. After construction is complete and you can proof that there is income to satisfy the debt to income ratio, you can refinance into a non-recourse fixed term loan. There are developers who you can hire to do development proforma analysis and manage the construction phase for you for a fee.

Topic Author
ElmoHongZito
Posts: 218
Joined: Tue Mar 27, 2018 9:17 am

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by ElmoHongZito » Thu Jul 25, 2019 9:57 pm

Wricha wrote:
Thu Jul 25, 2019 8:28 pm
ElmoHongZito wrote:
Thu Jul 25, 2019 7:46 pm
megabad wrote:
Thu Jul 25, 2019 5:54 pm
ElmoHongZito wrote:
Thu Jul 25, 2019 4:36 pm
Can anyone with experience in this share any suggestions or guidance that may help get us find something quicker and also comment on financing of a project like this. If we have a million for down payment, how much will a bank be willing to lend for this type of project??
Sure, I would put up my other properties as collateral and then I would easily get 70-75% financed. So this is about $4 million total ($3 million financed) assuming you have enough other equity in other properties. Of course this necessitates one bank holding all your property in most cases. Alternatively, I would have to show a massive income on my W2, but I usually take a ton in RE losses on my taxes so I can't do that. Banks in my area pretty much won't do small business loans of any size without personal backing.
So if the land plus buildout comes out to lets say 8 million, we would have to come to the table with 2 million (in the form of cash plus RE equity) to get financing for the project?
I would yes and that is the absolute minimum. The bank will want to see/understand your business plan and evaluate your business experience/successes to date. To you $2 million is a lot of money, to the bank they are thinking I don’t want to be stuck with a building even with a 25% discount.. They are bank not a real estate company. The bank is going to rely on your business experience and business plan to completely evaluate the project after all they are investing in a business not just a building. The business is going to determine whether you can afford the building not the down payment.
I appreciate the feedback and thanks for keeping it simple. We have been looking for the right property before working on what we need to show the bank in order to obtain financing. Maybe I should rearrange priorities and focus and be more patient with on finding the right real estate.

Topic Author
ElmoHongZito
Posts: 218
Joined: Tue Mar 27, 2018 9:17 am

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by ElmoHongZito » Thu Jul 25, 2019 10:05 pm

dawoof wrote:
Thu Jul 25, 2019 8:38 pm
Hi there,

Not knowing anything about the business, this sounds like a large development investment. Have you had any experience in developing a real estate project? I would definitely do a cashflow analysis as well as a real estate proforma to determine if the investment will generate enough income to be profitable. Construction cost is also very high right now across the industry.

I am in residential REI and have studied commercial real estate development but have not ventured into the arena. When you get into RE Development, the bank will want to see your construction plans plus contractors’ bid and they will do a market comparable to determine if your development will have the value and income to justify the loan. And that’s just the beginning.

From what I have learned in a typical leasable project, your first loan will be a construction recourse loan with variable rate. After construction is complete and you can proof that there is income to satisfy the debt to income ratio, you can refinance into a non-recourse fixed term loan. There are developers who you can hire to do development proforma analysis and manage the construction phase for you for a fee.
Thanks for opening my mind to other aspects of this project that we are definitely not prepared for yet. To answer your question i have never been involved in developing a real estate project. My business partner has some experience but not building from scratch. Do you have any suggestions on where I can find more advice and guidance on all the due diligence and preparation we will need in order to take on a commercial RE project and successfully approach a bank for funds?

mchampse
Posts: 267
Joined: Mon Feb 26, 2007 1:45 am

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by mchampse » Fri Jul 26, 2019 12:15 am

You are getting a lot of conflicting information and it probably makes sense to talk to a bank to get the straight goods.

That said, after the liar loan debacle banks want to make sure you can make the payments. They don’t want to re-possess.

If you own a $1M home free and clear and have no income, you can’t get a traditional mortgage even for $1. (There are options for someone in that boat such as reverse mortgages).

Same here. You are buying an empty piece of land with no income. Now you do have a business that’s presumably making money. If you bought the land in your business they may count that. You could also present the bank with a business plan and if they think it’s reasonable they could count that as income as well. Banks do offer “construction loans”, but I don’t know what the terms might look like.

You can also go to a “hard money” lender. These are non-bank lenders who will lend you money purely based on equity in the property. Though on residential property they lend 70-75% and on commercial likely less.

Best wishes.

Wricha
Posts: 514
Joined: Sun Mar 25, 2012 10:33 am

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by Wricha » Fri Jul 26, 2019 12:22 am

Wricha wrote:
Thu Jul 25, 2019 8:28 pm
ElmoHongZito wrote:
Thu Jul 25, 2019 7:46 pm
megabad wrote:
Thu Jul 25, 2019 5:54 pm
ElmoHongZito wrote:
Thu Jul 25, 2019 4:36 pm
Can anyone with experience in this share any suggestions or guidance that may help get us find something quicker and also comment on financing of a project like this. If we have a million for down payment, how much will a bank be willing to lend for this type of project??
Sure, I would put up my other properties as collateral and then I would easily get 70-75% financed. So this is about $4 million total ($3 million financed) assuming you have enough other equity in other properties. Of course this necessitates one bank holding all your property in most cases. Alternatively, I would have to show a massive income on my W2, but I usually take a ton in RE losses on my taxes so I can't do that. Banks in my area pretty much won't do small business loans of any size without personal backing.
So if the land plus buildout comes out to lets say 8 million, we would have to come to the table with 2 million (in the form of cash plus RE equity) to get financing for the project?
I would say yes and that is the absolute minimum. The bank will want to see/understand your business plan and evaluate your business experience/successes to date. To you $2 million is a lot of money, to the bank they are thinking I don’t want to be stuck with a building even with a 25% discount.. They are bank not a real estate company. The bank is going to rely on your business experience and business plan to completely evaluate the project after all they are investing in a business not just a building. The business is going to determine whether you can afford the building not the down payment.

StealthRabbit
Posts: 497
Joined: Sat Jun 13, 2009 1:25 am

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by StealthRabbit » Fri Jul 26, 2019 2:21 am

I think it is a very poor and preliminary idea to buy a commercial property for your own 'new' business.

options:
1) if your revenues are primarily the business. get that rolling first
2) If revenues are RE, get that rolling first.
3) NEVER have a single tenant Commercial prop. (Have enough tenants to easily cover the mortgage and expenses if YOUR business fails.
4) ONLY buy what make sense and can pay for itself (without you feeding it)
5) If you MUST use some of your own RE property for your personal business ... create a separate holding company
6) Do not involve a partner in a business or RE (too tough to make the required QUICK decisions)
7) ONLY invest money in your own business AFTER working / training for that gig from someone else for 5+ yrs
8) NEVER overestimate earnings or growth
9) Have 3 yrs cash on hand for new business (including allotted rents). Have a plan for 5 yrs B/E cash flows. (Have a back-up plan)
10) Get (2) educated 2nd opinions on the viability of your business (SCORE / SBDC, Banker)
11) NEVER seek a business that 100-% depends on you being the 'provider'. (sales, manag, operations, financing, accts payable, accts receivable, bookkeeping, taxes, permits, shopping, state qtrly, )

Seek wisdom and a mentor.
Last edited by StealthRabbit on Fri Jul 26, 2019 2:22 am, edited 1 time in total.

Bacchus01
Posts: 3182
Joined: Mon Dec 24, 2012 9:35 pm

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by Bacchus01 » Fri Jul 26, 2019 2:22 am

ElmoHongZito wrote:
Thu Jul 25, 2019 7:49 pm
Ping Pong wrote:
Thu Jul 25, 2019 7:43 pm
Customers typically want a hotel attached to these types of event spaces.
There is enough business for hotels and stand alone event venue businesses. Hotels also start at extremely high rates that not everyone has the budget for. The goal is to be strategically priced below hotels and higher than banquet halls.
Why would someone use you if more than banquet halls?

Hotels must be used anyway, and they are usually cheaper if you get enough rooms.

What is your value proposition here?

smitcat
Posts: 4675
Joined: Mon Nov 07, 2016 10:51 am

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by smitcat » Fri Jul 26, 2019 7:51 am

ElmoHongZito wrote:
Thu Jul 25, 2019 7:40 pm
Sandtrap wrote:
Thu Jul 25, 2019 5:22 pm
Do you have a business plan?
How much do you each have to invest?
Are you both now in the event business and have current clientele and cash flow and are not renting spaces as you need them?
If you built up this property for events, and the economy fell in several years, how will you handle debt repayment? Will you be able to sell the property and recover you investment?
j
We are in the "memorable events" space but not hosting the actual celebrations/venues. We do the photography, video, make-up, dresses and tuxedos and have a venue out in the suburbs for photo shoots. An event space would be a good complement to our business where we can go full circle and capture more of our clients spending budget in-house instead of only a portion of it.

As far as how much do we have to invest, neither of us are planning on comming out of pocket with more than 500k each, thus the million I mentioned in the original post. We will not get into the project if we cannot cover overhead with very minimal bookings. Goal would be to have 4-6 events every Friday and every Saturday, but would like to be able to cover monthly overhead with just 1-2 events per week. Might be wishful thinking but just wanted to answer your question that we are taking into consideration a possible market crash while being in a commodity business and at worst case scenario having a property that we could sell and recover our investment. With the amount of parking we plan to have and how difficult I have found it to be to find commercial space with ample parking, I think we have at least somewhat of an advantage if we ever go to sell.

Business plan and strategic implementation/marketing plan has not been completed because we have been investing most of our time in finding an actual space first and it has been a challenge. 40k sqft spaces in commercial shopping centers are not easy to find and when we do, they want 70-100k in rent per month. Land is outrageously expensive. Found a spot today that I like allot and if they agree to our use, they want 1.7 million per acre. This is why I am also asking about financing because with these ridiculous RE prices I am afraid that we need allot more cash than what we expected in order to take on this project. Thoughts?
"Goal would be to have 4-6 events every Friday and every Saturday, but would like to be able to cover monthly overhead with just 1-2 events per week."
What type of weekly gross and net revenue are you projecting here?

"With the amount of parking we plan to have and how difficult I have found it to be to find commercial space with ample parking, I think we have at least somewhat of an advantage if we ever go to sell."
I have not found this top be true - the process is lengthy and fraught with many problems.

"Business plan and strategic implementation/marketing plan has not been completed because we have been investing most of our time in finding an actual space first and it has been a challenge"
I believe you are doing the wrong step first which puts you into a circlic pattern of never having a full plan. and needing a plan to evaluate a property.
Have you visited your local SBDA, SCORE local college small business class, a few commercial realtors, SBA lenders , the closest competition and considered the downsides of any partnership yet?

dawoof
Posts: 18
Joined: Tue Jun 18, 2019 8:34 pm

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by dawoof » Fri Jul 26, 2019 8:27 am

ElmoHongZito wrote:
Thu Jul 25, 2019 10:05 pm
dawoof wrote:
Thu Jul 25, 2019 8:38 pm
Hi there,

Not knowing anything about the business, this sounds like a large development investment. Have you had any experience in developing a real estate project? I would definitely do a cashflow analysis as well as a real estate proforma to determine if the investment will generate enough income to be profitable. Construction cost is also very high right now across the industry.

I am in residential REI and have studied commercial real estate development but have not ventured into the arena. When you get into RE Development, the bank will want to see your construction plans plus contractors’ bid and they will do a market comparable to determine if your development will have the value and income to justify the loan. And that’s just the beginning.

From what I have learned in a typical leasable project, your first loan will be a construction recourse loan with variable rate. After construction is complete and you can proof that there is income to satisfy the debt to income ratio, you can refinance into a non-recourse fixed term loan. There are developers who you can hire to do development proforma analysis and manage the construction phase for you for a fee.
Thanks for opening my mind to other aspects of this project that we are definitely not prepared for yet. To answer your question i have never been involved in developing a real estate project. My business partner has some experience but not building from scratch. Do you have any suggestions on where I can find more advice and guidance on all the due diligence and preparation we will need in order to take on a commercial RE project and successfully approach a bank for funds?
As another poster suggested, the first party you need to talk to is the bank. They will ask you questions about your business revenue/plan, personal finance and can tell you about their lending procedure and what is required. It will give you a pretty good idea whether you will even be able to borrow. The bank will also look at your experience as part of their risk evaluation too. Becoming a developer is a huge undertaking that involves a lot of risks, capital and knowledge. You can lose a lot of money in it. I hope you really do your research thoroughly and evaluate your resources very carefully. You might want to talk to a local developer just to get an idea from them what is involved. There is a boglehead here who I believe is an underwriter for real estate. He might chime in soon.

User avatar
Sandtrap
Posts: 8705
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by Sandtrap » Fri Jul 26, 2019 9:07 am

StealthRabbit wrote:
Fri Jul 26, 2019 2:21 am
I think it is a very poor and preliminary idea to buy a commercial property for your own 'new' business.

options:
1) if your revenues are primarily the business. get that rolling first
2) If revenues are RE, get that rolling first.
3) NEVER have a single tenant Commercial prop. (Have enough tenants to easily cover the mortgage and expenses if YOUR business fails.
4) ONLY buy what make sense and can pay for itself (without you feeding it)
5) If you MUST use some of your own RE property for your personal business ... create a separate holding company
6) Do not involve a partner in a business or RE (too tough to make the required QUICK decisions)
7) ONLY invest money in your own business AFTER working / training for that gig from someone else for 5+ yrs
8) NEVER overestimate earnings or growth
9) Have 3 yrs cash on hand for new business (including allotted rents). Have a plan for 5 yrs B/E cash flows. (Have a back-up plan)
10) Get (2) educated 2nd opinions on the viability of your business (SCORE / SBDC, Banker)
11) NEVER seek a business that 100-% depends on you being the 'provider'. (sales, manag, operations, financing, accts payable, accts receivable, bookkeeping, taxes, permits, shopping, state qtrly, )

Seek wisdom and a mentor.
Great points.
Yes. This is why so many commercial properties have "anchor tenants" with secured leases long before groundbreaking.
j
Wiki Bogleheads Wiki: Everything You Need to Know

Topic Author
ElmoHongZito
Posts: 218
Joined: Tue Mar 27, 2018 9:17 am

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by ElmoHongZito » Sat Jul 27, 2019 8:29 am

smitcat wrote:
Fri Jul 26, 2019 7:51 am
ElmoHongZito wrote:
Thu Jul 25, 2019 7:40 pm
Sandtrap wrote:
Thu Jul 25, 2019 5:22 pm
Do you have a business plan?
How much do you each have to invest?
Are you both now in the event business and have current clientele and cash flow and are not renting spaces as you need them?
If you built up this property for events, and the economy fell in several years, how will you handle debt repayment? Will you be able to sell the property and recover you investment?
j
We are in the "memorable events" space but not hosting the actual celebrations/venues. We do the photography, video, make-up, dresses and tuxedos and have a venue out in the suburbs for photo shoots. An event space would be a good complement to our business where we can go full circle and capture more of our clients spending budget in-house instead of only a portion of it.

As far as how much do we have to invest, neither of us are planning on comming out of pocket with more than 500k each, thus the million I mentioned in the original post. We will not get into the project if we cannot cover overhead with very minimal bookings. Goal would be to have 4-6 events every Friday and every Saturday, but would like to be able to cover monthly overhead with just 1-2 events per week. Might be wishful thinking but just wanted to answer your question that we are taking into consideration a possible market crash while being in a commodity business and at worst case scenario having a property that we could sell and recover our investment. With the amount of parking we plan to have and how difficult I have found it to be to find commercial space with ample parking, I think we have at least somewhat of an advantage if we ever go to sell.

Business plan and strategic implementation/marketing plan has not been completed because we have been investing most of our time in finding an actual space first and it has been a challenge. 40k sqft spaces in commercial shopping centers are not easy to find and when we do, they want 70-100k in rent per month. Land is outrageously expensive. Found a spot today that I like allot and if they agree to our use, they want 1.7 million per acre. This is why I am also asking about financing because with these ridiculous RE prices I am afraid that we need allot more cash than what we expected in order to take on this project. Thoughts?
"Goal would be to have 4-6 events every Friday and every Saturday, but would like to be able to cover monthly overhead with just 1-2 events per week."
What type of weekly gross and net revenue are you projecting here?

"With the amount of parking we plan to have and how difficult I have found it to be to find commercial space with ample parking, I think we have at least somewhat of an advantage if we ever go to sell."
I have not found this top be true - the process is lengthy and fraught with many problems.

"Business plan and strategic implementation/marketing plan has not been completed because we have been investing most of our time in finding an actual space first and it has been a challenge"
I believe you are doing the wrong step first which puts you into a circlic pattern of never having a full plan. and needing a plan to evaluate a property.
Have you visited your local SBDA, SCORE local college small business class, a few commercial realtors, SBA lenders , the closest competition and considered the downsides of any partnership yet?
Thanks for the reminder. Just hit up score and local sbdc at my local alma mater. Hoping to get the guidance through them that I am looking for.

drgenefish
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Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by drgenefish » Sat Jul 27, 2019 8:59 am

Good luck in your business.

Near me there is a space that used to be a NASA training area. There is a huge centrifuge and lots of open space and rooms and really amazing artifacts.

The owner bought it and turned it into an event center. Put up lights and speakers and decorations. There’s 4 or 6 different rooms of various sizes for events. There’s also a bunch of offices that they rent out for people that just need a room. (like maybe an accountant, office space for a small business, etc).

Just an idea for you to maybe consider other buildings with character that you might have not considered. And even if you’re doing only a few events see if you can incorporate small office rentals to help offset ongoing expenses.

Also no idea how much money you have but the idea of a $4 million dollar loan for a biz without a plan and direct experience makes me sick to my stomach thinking about it :) I wonder if you can get at this another way? Maybe rent a space and host the events until you build up a good book of regular clients? Maybe an investor rather than a bank that gets 1/3 of the biz plus the building. I’m not sure the answer...just wonder if you can get at this another way.

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ElmoHongZito
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Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by ElmoHongZito » Sat Jul 27, 2019 10:35 am

drgenefish wrote:
Sat Jul 27, 2019 8:59 am
Good luck in your business.

Near me there is a space that used to be a NASA training area. There is a huge centrifuge and lots of open space and rooms and really amazing artifacts.

The owner bought it and turned it into an event center. Put up lights and speakers and decorations. There’s 4 or 6 different rooms of various sizes for events. There’s also a bunch of offices that they rent out for people that just need a room. (like maybe an accountant, office space for a small business, etc).

Just an idea for you to maybe consider other buildings with character that you might have not considered. And even if you’re doing only a few events see if you can incorporate small office rentals to help offset ongoing expenses.

Also no idea how much money you have but the idea of a $4 million dollar loan for a biz without a plan and direct experience makes me sick to my stomach thinking about it :) I wonder if you can get at this another way? Maybe rent a space and host the events until you build up a good book of regular clients? Maybe an investor rather than a bank that gets 1/3 of the biz plus the building. I’m not sure the answer...just wonder if you can get at this another way.
Thats really interesting! I like the idea of office rentals during weekdays. Would have to see how to incorporate that without diluting the image/brand. Everything else you have mentioned are things I have thought about and is on my radar. Thanks for your input.

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Nate79
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Location: Delaware

Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by Nate79 » Sat Jul 27, 2019 10:39 am

Rent. Going deeply in debt for a new business is extremely risky.

Topic Author
ElmoHongZito
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Re: Commercial Real Estate knowledge and/or experience? Help!!

Post by ElmoHongZito » Fri Aug 02, 2019 5:27 pm

So met with a consultant today that SCORE linked me with. Nice guy, easy to talk to, and enthusiastic about our project. His specialty is "the business plan". He even conducts workshops for building business plans. The following are his areas of expertise based on his profile on his website.

Strategic Business Planning
Concept Development
Restaurant Start Up
Personal and Organizational Branding
Budget Planning & Management
Public Health Regulations & Compliance
Operations Efficiency
Contract Negotiations
Supplier Relations and Assistance

I went in thinking we could get a ton of guidance at no cost because it is SCORE. He gave us his business card which is for his own company. It is a consulting company that specializes in the foodservice industry. He has an extensive background in the culinary industry working for very large international fast food brands and has also owned his own restaurants.

He did not make a direct pitch or anything but it sounded like he has the approval of SCORE to be hired by people like us for consulting services and was honest in saying that for SCORE it is not viewed as a conflict of interest but that in essence it is if you think about it. I appreciated his honesty.

My takeaway from our conversation was that he can do the business plan for us (for which I should receive a proposal for shortly from him) or he can meet with us for an hour every few weeks to assess and guide us as we build our own business plan. Me and my partner feel like we need a little bit of hand holding in order to do it right. Someone that has done tons of business plans before, knows what a good one looks like and knows where to find all the data we need to include so that it is practical and covers all our bases, is going to be instrumental in us moving the ball forward.

If he does the business plan for us, we will need to meet with him for an entire day to kick it off. At that meeting he will fact-find and extract all of our ideas and thoughts about how we envision the different aspects of the business we are creating so that he can begin formulating the business plan.
After the business plan is complete I think we should probably use that as a foundation and find guidance (maybe a PR firm) on formulating our strategic plan.

Any thoughts or feedback about any of this? I have absolutely no idea what this will cost us but I will soon. I am usually very cost conscience however I I can't take the risk of doing this half-baked (for lack of a better term).

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